Answered

At Westonci.ca, we make it easy for you to get the answers you need from a community of knowledgeable individuals. Experience the ease of finding accurate answers to your questions from a knowledgeable community of professionals. Experience the convenience of finding accurate answers to your questions from knowledgeable experts on our platform.

A stock with a beta of 2.0 has an expected rate of return of 13.15%. the risk-free rate in the market is 3.30%. what is the market premium? assume capm is true.

Sagot :

rahulsharma789888

The capital asset pricing model of the question is 1.15.

What is the Capital asset pricing method?

The value of a security is determined by the Capital Asset Pricing Model, or CAPM, based on the projected return in relation to the risk investors take when purchasing that security.

The formula for CAPM:

Following is the CAPM formula:

Beta i + R f = E(R i)

(E(R {m})-R {f})

The CAPM formula is:

The expected return on investment is equal to the risk-free rate plus the beta (or risk) of the investment multiplied by the market's anticipated return minus the risk-free rate (the difference between the two is the market risk premium).

The answer is calculated as:

Rf plus beta Equals CAPM* (Rm-Rf) E(r) equals 13.5% 3.3 percent

  • Rf Beta = ? Rm-Rf, sometimes referred to as market risk premium,
  • is equal to 8.8%. 13.5 % = 3.3 + beta (8.8 percent )
  • beta = 13.5 percent - 3.3 percent (8.8 percent )
  • 10.2% is equal to beta (8.8 percent )
  • Beta = 10.2% / 8.8% = 1.15909

Learn more about CAPM :

https://brainly.com/question/13814598

#SPJ1

Thanks for using our platform. We're always here to provide accurate and up-to-date answers to all 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.