If the risk-free rate of return, rRF İS 4% and the market return, rM is expected to be 12%, what is the required rate of return for a stock with a beta,B, equal to 2.5?
If the risk-free rate of return, rRF İS 4% and the market return, rM is expected to be 12%, what is the required rate of return for a stock with a beta,B, equal to 2.5?
Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter6: Risk And Return
Section: Chapter Questions
Problem 14P: You have observed the following returns over time:
Assume that the risk-free rate is 6% and the...
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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.
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