Market risk premium under the capital asset pricing model

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Reference no: EM131508122

Part A:

The estimated market risk premium under the Capital Asset Pricing Model is 11 percent and the risk free rate of return is 3.2 percent. What is the expected return for a stock with a beta of 1.8?

Part B:

If the market risk premium is 13.1 percent and the risk-free rate is 3.2, what is the expected rate of return for a stock with a beta of 1.34 under the Capital Asset Pricing Model (CAPM)?

Part C:

ABC has a beta of 1.32. The expected return for the S&P 500 stock index is 16.9 percent and U.S. Treasuries are expected to yield 4.3 percent. Based on the Capital Asset Pricing Model (CAPM), what is ABC's expected rate of return?

Part D:

The expected return on the entire stock market is 13% this year. The required rate of return on ABC stock is 11.9%. US Treasury securities are expected to earn 3.3%. Using the assumptions of the capital asset pricing model, what is ABC's beta? (Show your answer to two decimal places, e.g., 12.34)

Reference no: EM131508122

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