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
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

MC question attached

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).

steps

Step by step

Solved in 2 steps

Blurred answer
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education