A project has an assigned beta of 1.24, the risk-free rate is 3.8%, and the market rate of return is 9.2%. What is the project's expected rate of return? A. 15.21% B. 11.41% C. 10.50% D. 14.61%

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A: “Hi There, thanks for posting the question. But as per Q&A guidelines, we must answer the first…

Q: a and b please

A: Given :Rf​=5βSMB​=0.9,RPSMB​=6 βHML​=0.8,RPHML​=7 βMOM​=0.4,RPMOM​=4 Step 2: Part (a): Expected…

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A: Cost of capital can be found out from the capital asset pricing model using equation.

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A: Standard deviation of project A = 175 Standard deviation of project B = 370 Coefficient of variation…

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A: Expected return (Er) = 13.3% Market return (Rm) = 10.6% Risk free rate (Rf) = 2.4% Project beta = B

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A: The minimum return that an investor will accept on investment is called the required rate of return.…

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A: The calculation is shown as:

Q: Serenity Parts is considering a new project. They believe that the project has a beta of 2.00. The…

A: GIVEN, beta = 2rf=1.5%rm=12%

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A: Coefficient of variation computed as follows:-Coefficient of variation =

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A: Standard deviation = Where,Ri = returnPi = Probability.

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A: Hello. Since your question has multiple sub-parts, we will solve first three sub-parts for you. If…

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A: “Since you have posted a question with multiple subparts, we will solve the first three subparts for…

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A: Expected return = ∑p*r Variance = ∑p*(r-E(r))2

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Q: return

A: Introduction: To calculate the return which is expected by the investors, CAPM or capital asset…

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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.