Answered

Welcome to Westonci.ca, where finding answers to your questions is made simple by our community of experts. Get immediate and reliable solutions to your questions from a knowledgeable community of professionals on our platform. Experience the convenience of finding accurate answers to your questions from knowledgeable experts on our platform.

If IBM has a beta of 1.2 when the risk-free rate is 6% and the expected return on the market portfolio is 18%, the expected return on IBM is:

Sagot :

abiolataiwo2015

Answer:

20.4%

Explanation:

Calculation to determine what the expected return on IBM is:

Using this formula

E(Ribm)=Risk-free rate+(Market portfolio -Risk-free rate) Beta

Let plug in the formula

E(Ribm) = 6% +(18%-6%)1.2

E(Ribm)=6%+12%(1.2)

E(Ribm)=6%+14.4%

E(Ribm)=20.4%

Therefore the expected return on IBM is:20.4%

We hope this was helpful. Please come back whenever you need more information or answers to your queries. Your visit means a lot to us. Don't hesitate to return for more reliable answers to any questions you may have. Discover more at Westonci.ca. Return for the latest expert answers and updates on various topics.