Nudnt/Player honworkld /0%0659 t aquestorld-1 & nusred e fal se& ctd» 3905757&ce

Question

Nudnt/Player honworkld /0%0659 t aquestorld-1 & nusred e fal se& ctd» 3905757&cente;/Win Christina Lovering 5/29/16 10:53AM Homework: Assignment 4 Overview :00 0 0 0 0 0 00 01: Del PB 28 (smilar top Exercise Score: 0of10pts Assignment Score: 0% (0 of 100 pta) oot 10 complete security market line (SML) Assume that the risk-free rate, RP is currently 10% and that the market return, "m s currently 13%. ol a. Calculate the market rut premium. E b. Given the previous data, calculate the required return on asset A having a beta oro 8 and asset B having a beta of 1.4, a. The market risk premium is %.(Round to one decmal place ) Enteryour answer in the answer box, then clk Check Answer 2 parts mia ining Clear All Check Answer Save

Explanation / Answer

Details Given : Risk Free Rate =Rf =10% Market Return =Rm=13% Market Risk Premium=Market Retun-Risk Free Rate    =13%-10%=3% a So Market Risk Premium =3% b Beta of Asset A =0.80 Beta of Asset B =1.40 Requited Return on Asset=Risk free rate+Market Risk premium*Beta So Required Return of Asset A=10%+3%*0.80=12.4% So Required Return on Asset A =12.4% Required return of Asset B =10%+3%*1.4=14.2% So Required return of Asset B =14.2%

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