A firm has a beta of 0.6. If the return on the market is 9% and the risk-free return is 2%, then what is the firm's required return? a. 4.22% b. 6.20% c. 7.40% d. 2.42%

Q: If share C has a beta of 1,3; the risk-free rate is 8% and market risk premium is 7%, what would the…

A: Step 1: Given Value for Calculation Beta = b = 1.3Risk Free rate = rf = 8%market Risk Premium = mrp…

Q: Assuming the CAPM or one-factor model holds, what is the cost of equity for a firm if the firm's…

A: A model that represents the relationship of the required return and beta of a particular asset is…

Q: Expected Return CAPM If you know that the risk-free rate is 4.5% and the expected market risk…

A: CAPM is a model which is used to calculate the expected rate of return on the basis of the risk-free…

Q: SkyHi Corp.'s beta is 1.2. The expected market return is 6.4%. The risk-free rate is 3.7%. Find…

A: Capital Asset Pricing Model(CAPM) is used to find out cost of equity or expected return of a risky…

Q: The CRT Co. has a beta of 1.6 The expected market return is 9.5 percent and the risk free rate of…

A: Given that;Expected market return is 9.5%Risk free rate is 3.2%Beta is 1.6

Q: Suppose that Company ABC has a beta of .92.  The expected return on the market is 13% and the market…

A: Market return (Rm) = 0.13Market risk premium (Mp) = 0.102Beta of the stock (b) = 0.92Expected return…

Q: If the risk-free rate is 10.2% and the market risk premium is 4.4%, what is the required return for…

A: In the Given question we require to calculate the required return for the market from the following…

Q: Suppose there are two independent economic factors, M₁ and M2. The risk-free rate is 5%, and all…

A: PortfolioBeta on M1Beta on M2Expected return(%)A1.82.230B2.1-0.58

Q: Suppose that there are two independent economic factors, F1 and F2. The risk-free rate is 6%, and…

A: As per the given information: Risk-free rate - 6% Standard deviation - 43% Portfolio Beta on F1…

Q: If the expected rate of return on AZNG is 12.72, its beta is 1.09 and the market risk premium is 8%,…

A: The objective of the question is to find the risk-free rate given the expected rate of return on a…

Q: Your estimate of the market risk premium is 5%. The risk-free rate of return is 3%, and General…

A: General Motors has the following given details:Market Risk premium (Rm-Rf) = 5%Risk free rate (Rf)=…

Q: A company has a beta of  .59. If the market return is expected to be 12.9 percent and the risk-free…

A: To solve the question, we need to use the formula of capital asset pricing model (CAPM), it shows…

Q: Dhofar Energy Services has a Beta = 1.18 The risk-free rate on a treasury bill is currently 4.4% and…

A: As per Capital Asset Pricing Model(CAPM) Cost of equity = Risk Free Rate + (Market Return -Risk Free…

Q: Zacher Co.'s stock has a beta of 0.90, the risk-free rate is 4.25%, and the market risk premium is…

A: Beta = b = 0.90  Risk free rate = rf = 4.25% Market risk premium = mrp = 5.50%

Q: Suppose that there are two independent economic factors, F1 and F2. The risk-free rate is 6%, and…

A: Beta on F1 in A = 1.5Beta on F2 in A = 1.9Expected return of A = 31%Beta on F1 in B = 2,5Beta on F2…

Q: Suppose Pepsi Co. has a beta of 0.7, whereas the beta of Microsoft is 1.1. The risk free interest…

A: In this question we need to find expected return of Pepsi Co. and Microsoft According to CAPM.…

Q: Fiske Roofing Supplies' stock has a beta of 1.23, its required return is 8.50%, and the risk-free…

A: Fiske Roofing Supplies stock has beta 1.23, required return is 8.50% risk free rate is 4.30% , then…

Q: he risk-free rate is 8% and the expected return on a market portfolio is 13%. If a share has a beta…

A: Risk free rate = 8% Market return = 13% Stock beta = 1.20

Q: You have estimated a firm's beta value to be 1.2. The expected return of the market portfolio is 12%…

A: We require to calculate the required rate of return for the firm in this question. We can solve this…

Q: Beagle Beauties engages in the development, manufacture, and sale of a line of cosmetics designed to…

A: The Price Multiple approach can be used to calculate the expected price of a share by estimating the…

Q: What is the rate of return for a company if its β is 1.8, risk free rate of return is 17% and the…

A: The rate of return of a company can be calculated using Capital Asset Pricing Model(CAPM).

Q: What is the expected rate of return if the beta is 1.14 and the Rf is 4.2%, Rm is 12%

A: According to Capital asset pricing model ,k = Rf+[b*(Rm-Rf)]wherek= expected rate of returnRf= risk…

Q: Dhofar Silicon Services has a B(Beta)= 1.4.The risk free rate on a treasury bill is currently 8.2%…

A: The Correct option is OPTION-C. This problem is related to Capital Asset Pricing Model (CAPM)…

Q: The risk-free rate is 4%%. The market risk-premium is 79%. The beta is 20. What is the expected rate…

A: Financial management consists of directing, planning, organizing and controlling of financial…

Q: Stock Z has a beta of 1.4, and its required rate of return is 10.00%. Stock B's beta is 0.80. If the…

A: In the given case, we have provided the stock Z beta, required rate of return and risk free rate.…

Q: If a firm's beta is 1.1, the risk-free rate is 6%, and the expected return on the market is 14%,…

A: Details given are : Beta = 1.1 Risk free rate = 6% Expected market return = 14% We need to compute…

Q: Assuming that the expected market return [E(Rm)] is 11% and the risk-free rate of return (Rf) is 8%,…

A: The cost of equity refers to the required rate of return that is expected from the investment. It is…

Q: What return would you expect if the risk-free rate of return was 5 per cent, the beta risk is 1.5,…

A: To assess market behaviour, one uses the Capital Asset Pricing Model (CAPM). The concept is based on…

Q: Required Return Beta Risk-Free Rate Market Return A 12.5% 0.90 8% ? B 9.0% 1.3 ? 8% C…

A: The capital asset pricing model (CAPM) describes the relationship between systematic risk ( measured…

Q: Suppose there are two independent economic factors, M₁ and M₂. The risk-free rate is 4%, and all…

A: The expected return-beta relationship in the Capital Asset Pricing Model (CAPM) is a fundamental…

Q: The expected return on Share X is 15.75% while the risk-free rate of return is 7%. If the expected…

A: Expected return =Rf + beta * ( Rm- Rf) Rf = Risk free rate Rm =Expected return on market

Q: Assume that the risk-free interest rate is 3%, the market rate of return is 7% and the beta for…

A: The comparison of the whole market with the systematic risk or volatility of a stock or the…

Q: Suppose there are two independent economic factors, M₁ and M₂. The risk-free rate is 7%, and all…

A: The expected return formula is as follows:Expected Return = Riskfree rate + Beta 1 x Risk premium of…

Q: The risk-free rate is 2% and the expected return on a market portfolio is 6%. If a share has a beta…

A: As per CAPM Ri = Rf + B (Rm - Rf) Where Ri = Return on equity Rf = Risk free rate of return B = Beta…

Q: Dhofar Energy Services has a Beta = 1  The risk-free rate on a treasury bill is currently 4.4% and…

A: By Capital asset pricing model: Cost of equity = Rf + ß*(Rm - Rf) Rm = (Cost of equity - Rf)/ß + Rf

Q: You observe the following: ABC Inc. has 1.8 Beta and .2 Expected return ABC Inc. has 1.8 Beta and .2…

A: Given Information ABC Inc. Beta = 1.8 Expected Return of ABC Inc. =0.2 XYZ Inc beta =1.6 Expected…

Q: The risk free rate is 9.5%. If the market portfolio has a mean return of 6.6%, what security market…

A: The capital assets pricing model has been represented by the SML  line which gives you required rate…

Q: 4. Assume that the risk-free rate is 5% and the expected return on the market is 12%. What is the…

A: In the given question we are required to calculate required rate of return of stock using given…

Q: CAPM Required Return A company has a beta of .99. If the market return is expected to be 10.4…

A: Required Return: It is the rate of return which is the least satisfactory return an investor may…

Q: Dhofar Energy Services has a Beta = 0.69 The risk-free rate on a treasury bill is currently 4.4% and…

A: The formula used is shown:

Q: Compute Bowling Avenue Inc.'s required rate of return given a beta of.9, risk free rate of 3.25%,…

A: Calculation of required rate of return:Answer:The required rate of return is 8.425%

Q: 2. On a market with an average expected return of 11% the efficient frontier has the following…

A: The Treynor Ratio is a financial metric that measures the risk-adjusted return of an investment…

Q: Dhofar Energy Services has a Beta = 0.93 The risk - free rate on a treasury bill is currently 4.4%…

A: Given: Beta =0.93Risk free rate(Rf) =4.4%Cost of equity(Ke) =20.70%

Q: What is the expected market return if the expected return on STC is 20 percent, its beta is 1.5, and…

A: The Capital Asset Pricing Model (CAPM) is a financial model that helps investors understand the…

Q: Saveu Suppose that there are two independent economic factors, F1 and F2. The risk-free rate is 6%,…

A: Risk - free rate refers to the rate of return of an investment which is devoid of any risk of…

Q: Zacher Co.'s stock has a beta of 1.50, the risk-free rate is 4.25%, and the market risk premium is…

A: Given data; beta of stock = 1.50 risk free rate = 4.25% market risk premium = 5.50%

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary. 

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.