If the risk-free rate is 10.1 percent and the market risk premium is 4.2 percent, what is the required return for the market? A. 4.2 percent. B. 5.9 percent. C. 14.3 percent. D. 10.1 percent.
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- Required Return If the risk-free rate is 11.8 percent and the market risk premium is 7.6 percent, what is the required return for the market?Required Return If the risk-free rate is 10.2 percent and the market risk premium is 4.4 percent, what is the required return for the market? Multiple Choice A. 5.8% B. 4.4% C. 14.6% D. 10.2%Q. The market rate of return is 14%, beta is 1.5 and the required rate of return is 18.5%. What is risk-free rate of return?
- 4. Explain what the Capital Asset Pricing Model (CAPM) is and calculate and explain the result of the CAPM based on the following data. a. Expected Return: 8% b. Risk-free rate: 4% c. Beta of the investment: 1.2 ER=Rf+B(ERm - Rf) where: ER = expected return of investment Rf risk-free rate B;= beta of the investment - (ERm - Rf) = market risk premiumThe expected market return is 5%. The risk-free rate is 3%. According to the CAPM equation, what is the expected return on an asset which has alpha=1.5%, and beta=1.9 ? O a. 11.0% O b. 5.3% O c. 5% O d. 6.8% O e. 8.3%If the risk-free rate is 4.8 percent and the risk premium is 6.8 percent, what is the required return? (Round your answer to 1 decimal place.) Required Return: ___.__%
- For each of the cases shown in the following table, use the capital asset pricing model (CAPM) to find the required return and explain your answer. Case Risk-free rate Market return Beta (%) (%) 8 A 5 1.3 В 8. 13 0.9 C 9 12 -0.2 D 10 15 1.0 E 10 0.6Suppose the risk-free rate is 5%. The expected return and standard deviation of a risky asset are 10% and 20%, respectively. a. What is the slope of the capital allocation line (CAL) constructed using the risk-free asset and the risky asset? A. 0.30 B. 0.15 C. 0.25 D. 0.20 b. If an investor has a risk aversion coefficient of A=2, what is the optimal fraction of the money that she invests in the risky asset? A. 62.5% B. 42.5% C. 30% D. 20% c. If an investor invest 25% of her money in the risky asset, which is the investor’s risk aversion coefficient? a. 5 b. 1 c. 3 d. 4Assume that the risk-free rate, RF, is currently 9% and that the market return, rm, is currently 16%. a. Calculate the market risk premium. b. Given the previous data, calculate the required return on asset A having a beta of 0.4 and asset B having a beta of 1.8.