d 154604 ied TestThis tst has a it of 1 hous Thes lesl will save and be sutnited

Question

d 154604 ied TestThis tst has a it of 1 hous Thes lesl will save and be sutnited ecture 1 Video ecture 2 Video ecture 3 Video Lecture 4 ideo Lecturo 5 Video Lechure 6 Video Lechure 7 Video Lecture 8 Video Wamings appear whon hall the tiene 5 minutes, 1 minote, and 30 seconds ulliple Ams Not allowed This Test can only be taken onor Force Completion Once started, this tes mnt be completd in o iting Do not eave the est belure ciking Seve and Sue his test does not allow bacitracking Changes to the ansver aher subeibalon ane peo Remaining Time: 30 minutes, 34 seconds. ·Oestion Completion Status: Lecture Materials ssignments and due dates nline Test Student Survey Proquest login My Grade 0 1 130% 2129% 03136% 04 140% Movngtoth, neut Oesin prevents changes to fn nme' LG

Explanation / Answer

Option number 3. 13.6% (3rd option)

Using CAPM model:

Ri = Rf + Beta x (Rm – Rf)

Risk free rate = Rf = 4%

Return on market = Rm = 12%

Return on security = Ri = ?

Beta = 1.2

Now let’s substitute the variables in CAPM model:

Ri = 4% + 1.2 x (12% - 4%)

Ri = 4% + 1.2 x (8%)

Ri = 13.60 % (Option number 3. is correct)

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