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Given the following information for ABB Ltd: Risk free rate = 5% p.a. Mark risk premium = 12% Beta coefficient =1.3 According to the Capital Asset Pricing Model (CAPM), ABB Ltd has an expected return of: a. 20.6% b. 14.1% c. 17% d. 10%

Given the following information for ABB Ltd: Risk free rate = 5% p.a. Mark risk premium = 12% Beta coefficient =1.3 According to the Capital Asset Pricing Model (CAPM), ABB Ltd has an expected return of: a. 20.6% b. 14.1% c. 17% d. 10%

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Given the following information for ABB Ltd: Risk free rate = 5% p.a. Mark risk premium = 12% Beta coefficient =1.3 According to the Capital Asset Pricing Model (CAPM), ABB Ltd has an expected return of: a. 20.6% b. 14.1% c. 17% d. 10%
Transcribed Image Text:Given the following information for ABB Ltd: Risk free rate = 5% p.a. Mark risk premium = 12% Beta coefficient =1.3 According to the Capital Asset Pricing Model (CAPM), ABB Ltd has an expected return of: a. 20.6% b. 14.1% c. 17% d. 10%
Expert Solution
Step 1 Introduction

The capital asset pricing model, often known as CAPM, is a kind of financial model that determines the rate of return that may be reasonably anticipated from an investment or asset. The capital asset pricing model (CAPM) does this by taking into account the projected return on the market as well as a risk-free asset, as well as the asset's correlation with or sensitivity to the market (beta).

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