The estimated beta for Caterpillar Inc. is 135. The risk free rate of return is 3 percent and the Equity Risk Premium is 4 percent. What is the required rate of return for CAT using the CAPM? Group of answer choices 8.496 12.396 15.26 10.196

Q: Your estimate of the market risk premium is 5%. The risk-free rate of return is 4%, and JB Hi Fi has…

A: Market Risk Premium = 5% Risk Free Rate = 4% Beta = 1.5

Q: QUESTIONS: 1) Assuming that the risk-free rate of return is currently 3,2%, the market risk premium…

A: Since you have posted multiple questions, we will provide the solution only to the first question as…

Q: Suppose the risk free rate (rfr) = 5%, average market return (rm) = 10%, and the required or…

A: In the given question we have two parts: In the first part we need to calculate the Beta of TNG  In…

Q: The current appropriate risk-free rate is 6% and the return on the market is 13.5%.   levered beta…

A: Risk Free Rate = 6% Expected Return on market portfolio = 13.5% Beta = 1.29

Q: Dhofar Energy Services has a Beta = 1.18 The risk-free rate on a treasury bill is currently 4.4% and…

A: As per Capital Asset Pricing Model(CAPM) Cost of equity = Risk Free Rate + (Market Return -Risk Free…

Q: Assume that the risk-free rate of return is 4% and the market risk premium (Le., Rm- R:) is 896. If…

A: Financial management consists of directing, planning, organizing and controlling of financial…

Q: Asset A has an expected return of 10%. The expected market return is 14% and the risk-free rate is…

A: The calculation is shown: Hence, answer C is the correct option.

Q: Dhofar Silicon Services has a B(Beta)= 1.4.The risk free rate on a treasury bill is currently 8.2%…

A: The Correct option is OPTION-C. This problem is related to Capital Asset Pricing Model (CAPM)…

Q: How to set-up this problem? Refer to the following example for part i) Risk-free rate of return = 3%…

A:

Q: If a firm's beta is 1.1, the risk-free rate is 6%, and the expected return on the market is 14%,…

A: Details given are : Beta = 1.1 Risk free rate = 6% Expected market return = 14% We need to compute…

Q: The current risk-free rate of return (rRf) is 4.67% while the market risk premium is 5.75%. The…

A: According to the CAPM model the cost of equity is the sum of the risk free rate plus the product of…

Q: Suppose the market risk premium is 4.0 % and the risk-free interest rate is 3.0%. Use the data below…

A: Given details are : Market risk premium = 4% Risk free rate = 3% Beta = 2.28 From above details we…

Q: Dhofar Silicon Services has a Beta = 2.42 The risk free rate on a treasury bill is currently 8.2%…

A: Beta = 2.42 Risk free rate = 8.2% Market return = 16%

Q: Assume that the risk-free interest rate is 3%, the market rate of return is 7% and the beta for…

A: The comparison of the whole market with the systematic risk or volatility of a stock or the…

Q: Use the required return-beta equation from the CAPM What is the required return if the risk-free…

A: The Capital Asset Pricing Model (CAPM) measures the relationship between the return and the risk of…

Q: Dhofar Energy Services has a Beta = 1  The risk-free rate on a treasury bill is currently 4.4% and…

A: By Capital asset pricing model: Cost of equity = Rf + ß*(Rm - Rf) Rm = (Cost of equity - Rf)/ß + Rf

Q: What is the beta of a firm whose equity has an expected return of 21.3 percent when the risk-free…

A: Beta = ( Expected retrun -risk free rate)  / (market return - risk free rate )

Q: What is a beta coefficient, and how are betas used in risk analysis? Do the expected returns appear…

A: Estimated rate of return is the rate of return which an investor expects to generate from the…

Q: The current appropriate risk-free rate is 6% and the return on the market is 13.5%.Further assume…

A: CAPM model is used to calculate required rate of return on equity or the cost of equity. It is…

Q: The risk-free rate is 3%, the market risk premium (MRP) is 8%, and the Beta of Lotsa Dough common…

A: Risk free rate = 3% Market risk premium = 8% Beta = 0.90

Q: Dhofar Energy Services has a Beta = 0.93 The risk - free rate on a treasury bill is currently 4.4%…

A: Given: Beta =0.93Risk free rate(Rf) =4.4%Cost of equity(Ke) =20.70%

Q: For each of the cases shown in the following table, use the capital asset pricing model (CAPM) to…

A: While making investment decisions, investors, be it individuals or firms will have to perform an…

Q: The​ risk-free rate is currently 3.3​%, and the market return is 14.8​%. Assume you are considering…

A: The capital asset pricing model is a model used to determine a theoretically appropriate required…

Q: Dhofar Energy Services has a Beta = 1.04  The risk-free rate on a treasury bill is currently 4.4%…

A: A company has several sources from where it can raise funds. It can issue equity shares and the…

Q: If the beta of Asset A is 2.2, the risk free rate is 2.5%, and the expected return on Asset A is 8%,…

A: Expected return on market refers to the money that is invested for expecting to make an investment…

Q: Father Time asks us what is the expected return on asset A if it has a beta of .75, the expected…

A: In the given question we require to calculate the Expected return on Asset A using the following…

Q: You want to estimate the cost of equity of firm A using CAPM. Firm A has a beta of 1.3. Assume that…

A: Cost of equity refers to the return over the investment amount in exchange by the investors using a…

Q: Assume that the risk-free rate of return is 4% and the market risk premium (ie, Rm - Rp) is 8%. If…

A: Financial statements are statements which states the business activities performed by the company .…

Q: What is the expected market return if the expected return on asset A is 19% and the risk free rate…

A: A model that represents the relationship of the required return and beta of a particular asset is…

Q: Dhofar Energy Services has a Beta = 1.68 The risk-free rate on a treasury bill is currently 4.4% and…

A: The Capital Asset Pricing Model (CAPM) explains the relationship between systematic risk and…

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.