ezto.mheducation.com/hmtp 90% asearch * Most Visited Getting Started m My USC Ai
ID: 2802547 • Letter: E
Question
ezto.mheducation.com/hmtp 90% asearch * Most Visited Getting Started m My USC Aiken-Black." The True Story of Poca. connedt FINANCE BADM 363 Business Finance: Fall 2017 (ALI SECTIONS) Chapter 11 Homework Questlion 6 (of 10) 10.00 points Problem 11-16 Using CAPM ILO 4 A stock has an expected return of 132 percent and a beta of 1.18, and the expected return on the market is 12 2 percent What must the risk free rate be? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g, 32.16.) Risk -free rate References eBook & Resources Difficulty 1 Basic Sicdis h ty Market Lin Worksheet Learning Objective 11-04 Discuss the security mar ine and the risk return trade of Problem 11-16 Using CAPM [LO 4]Explanation / Answer
Expected return=Risk free rate+Beta*(MArket rate-Risk free rate)
13.2=Rf+1.18*(12.2-Rf)
13.2=Rf+14.396-1.18Rf
Hence Risk free rate=(14.396-13.2)/(1.18-1)=6.64%(Approx).
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.