Capital asset pricing model-expected rate of return

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Reference no: EM131508084

Part A:

ABC has a beta of 1.61. The expected return for the S&P 500 stock index is 14.3 percent and U.S. Treasuries are expected to yield 3.4 percent. Based on the Capital Asset Pricing Model (CAPM), what is ABC's expected rate of return? (show your answer in decimal form to four places)

Part B:

The rate on US Treasury securities is 2.1% and the expected return on the S&P 500 stock market index is 17.6%. Under the capital asset pricing model, what would be the expected return on a stock with a beta of 2.1? (Show your answer as a decimal to three places, e.g., if the answer is 12.3% input 0.123)

Reference no: EM131508084

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