Manipulating CAPM Use the basic equation for the capital asset pricing model (CAPM) to work each of the following problems. a. Find the required return for an asset with a beta of 1.59 when the risk-free rate and market return are 7% and 12%, respectively. b. Find the risk-free rate for a firm with a required return of 10.925% and a beta of 0.84 when the market return is 12%. c. Find the market return for an asset with a required return of 9.417% and a beta of 0.31 when the risk-free rate is 8%. d. Find the beta for an asset with a required return of 19.559% when the risk-free rate and market return are 10% and 17.9%, respectively. a. The required return for an asset with a beta of 1.59 when the risk-free rate and market return are 7% and 12%, respectively, is %. (Round to two decimal places.) b. The risk-free rate for a firm with a required return of 10.925% and a beta of 0.84 when the market return is 12% is %. (Round to two decimal places.) c. The market return for an asset with a required return of 9.417% and a beta of 0.31 when the risk-free rate is 8% is %. (Round to two decimal places.) d. The beta for an asset with a required return of 19.559% when the risk-free rate and market return are 10% and 17.9%, respectively, is (Round to two decimal places.)
Manipulating CAPM Use the basic equation for the capital asset pricing model (CAPM) to work each of the following problems. a. Find the required return for an asset with a beta of 1.59 when the risk-free rate and market return are 7% and 12%, respectively. b. Find the risk-free rate for a firm with a required return of 10.925% and a beta of 0.84 when the market return is 12%. c. Find the market return for an asset with a required return of 9.417% and a beta of 0.31 when the risk-free rate is 8%. d. Find the beta for an asset with a required return of 19.559% when the risk-free rate and market return are 10% and 17.9%, respectively. a. The required return for an asset with a beta of 1.59 when the risk-free rate and market return are 7% and 12%, respectively, is %. (Round to two decimal places.) b. The risk-free rate for a firm with a required return of 10.925% and a beta of 0.84 when the market return is 12% is %. (Round to two decimal places.) c. The market return for an asset with a required return of 9.417% and a beta of 0.31 when the risk-free rate is 8% is %. (Round to two decimal places.) d. The beta for an asset with a required return of 19.559% when the risk-free rate and market return are 10% and 17.9%, respectively, is (Round to two decimal places.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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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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Transcribed Image Text:Manipulating CAPM Use the basic equation for the capital asset pricing model (CAPM) to work each of the following problems.
a. Find the required return for an asset with a beta of 1.59 when the risk-free rate and market return are 7% and 12%, respectively.
b. Find the risk-free rate for a firm with a required return of 10.925% and a beta of 0.84 when the market return is 12%.
c. Find the market return for an asset with a required return of 9.417% and a beta of 0.31 when the risk-free rate is 8%.
d. Find the beta for an asset with a required return of 19.559% when the risk-free rate and market return are 10% and 17.9%, respectively.
a. The required return for an asset with a beta of 1.59 when the risk-free rate and market return are 7% and 12%, respectively, is %. (Round to two decimal places.)
b. The risk-free rate for a firm with a required return of 10.925% and a beta of 0.84 when the market return is 12% is
%. (Round to two decimal places.)
c. The market return for an asset with a required return of 9.417% and a beta of 0.31 when the risk-free rate is 8% is
%. (Round to two decimal places.)
d. The beta for an asset with a required return of 19.559% when the risk-free rate and market return are 10% and 17.9%, respectively, is
(Round to two decimal places.)
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