The resident Economist in the Investment Firm you work for has generated th following expected end-of-year prices for Apple and the market portfolio, conditional on the state of the economy. The market portfolio and Apple are selling for $150 and $40 today. State of the Economy Probability Market Portfolio Apple Stock Extreme Growth 206.25 46.75 Normal Growth 156.25 52.75 Recession 112.50 58.00 Depression 100.00 59.50 0.20 0.50 0.20 0.10 Use this information to answer the following questions. Report your answer as a number (Example 1.0). What is the expected return of Apple according to the CAPM if the risk-free rate is 2%?
The resident Economist in the Investment Firm you work for has generated th following expected end-of-year prices for Apple and the market portfolio, conditional on the state of the economy. The market portfolio and Apple are selling for $150 and $40 today. State of the Economy Probability Market Portfolio Apple Stock Extreme Growth 206.25 46.75 Normal Growth 156.25 52.75 Recession 112.50 58.00 Depression 100.00 59.50 0.20 0.50 0.20 0.10 Use this information to answer the following questions. Report your answer as a number (Example 1.0). What is the expected return of Apple according to the CAPM if the risk-free rate is 2%?
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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Transcribed Image Text:The resident Economist in the Investment Firm you work for has generated th
following expected end-of-year prices for Apple and the market portfolio,
conditional on the state of the economy. The market portfolio and Apple are
selling for $150 and $40 today.
State of the Economy Probability Market Portfolio Apple Stock
Extreme Growth 0.20
206.25
46.75
Normal Growth
0.50
156.25
52.75
Recession
0.20
112.50
58.00
Depression
0.10
100.00
59.50
Use this information to answer the following questions.
Report your answer as a number (Example 1.0).
What is the expected return of Apple according to the CAPM if the risk-free
rate is 2%?
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