If the risk free rate general accounting If the risk-free rate is 8.5 percent and the market risk premium is3.0 percent, what is the required return for the market?a. 8.5 percent.b. 3.0 percent.c. 5.5 percent.d. 11.5 percent.

To solve this problem, we need to use the capital asset pricing model (CAPM) formula:Required return…

Answered: If the risk-free rate is 8.5 percent…

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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Consider an asset with a beta of 1.2, a risk-free rate of 4.3%, and a market return of 12%. What is the reward-to-risk ratio in equilibrium? What is the expected return on the asset?
2

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If the risk-free rate is 8.5 percent and the market risk premium is 3.0 percent, what is the required return for the market? a. 8.5 percent. b. 3.0 percent. c. 5.5 percent. d. 11.5 percent.