4. Consider the following information for company XYZ: Probability Market Return 0.10 0.30 0.40 0.20 State 1 2 3 4 -0.12 0.03 0.10 0.20 Company Return -0.24 0.00 0.15 0.50 Assume that Cov(XYZ, Market)= 1.8408% and that the risk free rate = 3%. Using the CAPM, find XYZ's required rate of return.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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4. Consider the following information for company XYZ:
Probability
Market Return
0.10
0.30
0.40
0.20
State
1
2
3
4
-0.12
0.03
0.10
0.20
Company Return
-0.24
0.00
0.15
0.50
Assume that Cov(XYZ, Market)= 1.8408% and that the risk free rate = 3%.
Using the CAPM, find XYZ's required rate of return.
Transcribed Image Text:4. Consider the following information for company XYZ: Probability Market Return 0.10 0.30 0.40 0.20 State 1 2 3 4 -0.12 0.03 0.10 0.20 Company Return -0.24 0.00 0.15 0.50 Assume that Cov(XYZ, Market)= 1.8408% and that the risk free rate = 3%. Using the CAPM, find XYZ's required rate of return.
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