Understanding CAPM and beta. Assume the common stock of Starbucks has a beta of 0.61. Also, assume the rate of return on the market is Rm = 11 percent and the risk-free rate of return is Rf = 3 percent. According to CAPM, what is the expected return E(R;) on the common stock of Starbuck's? Hint: see CAPM formula of E(starbucks) = Rf + [(Rm - R;) * (betastarbucks)] O 7.88 percent O 8.60 percent O 10.75 percent O 12.45 percent O 22.75 percent
Understanding CAPM and beta. Assume the common stock of Starbucks has a beta of 0.61. Also, assume the rate of return on the market is Rm = 11 percent and the risk-free rate of return is Rf = 3 percent. According to CAPM, what is the expected return E(R;) on the common stock of Starbuck's? Hint: see CAPM formula of E(starbucks) = Rf + [(Rm - R;) * (betastarbucks)] O 7.88 percent O 8.60 percent O 10.75 percent O 12.45 percent O 22.75 percent
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
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![Understanding CAPM and beta. Assume the common stock of Starbucks has a beta of 0.61. Also, assume the rate of
return on the market is Rm = 11 percent and the risk-free rate of return is Rf = 3 percent. According to CAPM, what
is the expected return E(R;) on the common stock of Starbuck's? Hint: see CAPM formula of E(starbucks) = Rf + [(Rm -
Rf) * (betastarbucks)]
O 7.88 percent
O 8.60 percent
O 10.75 percent
O 12.45 percent
O 22.75 percent](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fdda2e6e6-ca58-4abe-9533-70c387835f46%2F579e3136-5cdb-48ec-a4ff-7edaf78b17be%2Fognjz9m_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Understanding CAPM and beta. Assume the common stock of Starbucks has a beta of 0.61. Also, assume the rate of
return on the market is Rm = 11 percent and the risk-free rate of return is Rf = 3 percent. According to CAPM, what
is the expected return E(R;) on the common stock of Starbuck's? Hint: see CAPM formula of E(starbucks) = Rf + [(Rm -
Rf) * (betastarbucks)]
O 7.88 percent
O 8.60 percent
O 10.75 percent
O 12.45 percent
O 22.75 percent
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