(Using the CAPM to find expected returns) Sante Capital operates two mutual funds headquartered in Houston, Texas. The firm is evaluating the stock of four different firms for possible inclusion in its fund holdings. As part of their analysis, Sante's managers have asked their junior analyst to estimate the investor-required rate of return on each firm's shares using the CAPM and the following estimates: The rate of interest on short-term U.S. Treasury securities is currently 4.5 percent, and the expected return for the market portfolio is 9.5 percent. What should be the expected rates of return for each investment? Security A Beta 1.44 B с D 0.51 1.19 0.89 (Click on the icon in order to copy its contents into a spreadsheet.)
(Using the CAPM to find expected returns) Sante Capital operates two mutual funds headquartered in Houston, Texas. The firm is evaluating the stock of four different firms for possible inclusion in its fund holdings. As part of their analysis, Sante's managers have asked their junior analyst to estimate the investor-required rate of return on each firm's shares using the CAPM and the following estimates: The rate of interest on short-term U.S. Treasury securities is currently 4.5 percent, and the expected return for the market portfolio is 9.5 percent. What should be the expected rates of return for each investment? Security A Beta 1.44 B с D 0.51 1.19 0.89 (Click on the icon in order to copy its contents into a spreadsheet.)
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:(Using the CAPM to find expected returns) Sante Capital operates two mutual funds headquartered in Houston, Texas. The firm is evaluating the stock of four different firms for possible inclusion in its fund holdings. As part of their analysis, Sante's managers have asked their junior analyst to
estimate the investor-required rate of return on each firm's shares using the CAPM and the following estimates: The rate of interest on short-term U.S. Treasury securities is currently 4.5 percent, and the expected return for the market portfolio is 9.5 percent. What should be the expected rates of
return for each investment?
Security
A
Beta
1.44
B
с
D
0.51
1.19
0.89
(Click on the icon in order to copy its contents into a spreadsheet.)
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