**Expected Return and Beta Estimation**Monroe McIntyre has estimated the expected return for Bruehl Industries to be 9.45%. He notes that the risk-free rate is 1.30% and the return of the market is 10.60%. Based on this information, he estimates Bruehl's beta to be:- A. 0.88- B. 0.77- C. 1.02**Explanation:**In this scenario, Monroe McIntyre is using the Capital Asset Pricing Model (CAPM) to estimate the beta of Bruehl Industries. The CAPM formula is:\[ \text{Expected Return} = \text{Risk-Free Rate} + \beta \times (\text{Market Return} - \text{Risk-Free Rate}) \]By rearranging the formula, we can solve for beta (\(\beta\)):\[ \beta = \frac{\text{Expected Return} - \text{Risk-Free Rate}}{\text{Market Return} - \text{Risk-Free Rate}} \]Plugging in the numbers:- Expected Return = 9.45%- Risk-Free Rate = 1.30%- Market Return = 10.60%\[ \beta = \frac{9.45\% - 1.30\%}{10.60\% - 1.30\%} \]

Monroe Mclntyre has estimated the expected return for Bruehl Industries to be 9.45%. He notes the risk-free rate is 1.30% and the return of the market is 10.60%. Based on this information, he estimates Bruehl's beta to be: O A. 0.88. O B. 0.77. O C. 1.02.

Monroe Mclntyre has estimated the expected return for Bruehl Industries to be 9.45%. He notes the risk-free rate is 1.30% and the return of the market is 10.60%. Based on this information, he estimates Bruehl's beta to be: O A. 0.88. O B. 0.77. O C. 1.02.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter3: Risk And Return: Part Ii

Section: Chapter Questions

Problem 2P: APT An analyst has modeled the stock of Crisp Trucking using a two-factor APT model. The risk-free...

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Asset A has an expected return of 10%. The expected market return is 14% and the risk-free rate is 5%. What is asset A's beta? Select one: O a. 0.88 O b.0.67 O C. 0.55 O d.o.33 O e. 1.15
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