We expect a return on the market of 11.400% and a risk-free rate of 1.400%. We expect that in this market Discovery Cafe will generate a return of 5.900%. Thus we can calculate that Discovery Cafe has a beta of and the risk premium in this market is %.

We expect a return on the market of 11.400% and a risk-free rate of 1.400%. We expect that in this market Discovery Cafe will generate a return of 5.900%. Thus we can calculate that Discovery Cafe has a beta of and the risk premium in this market is %.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter2: Risk And Return: Part I

Section: Chapter Questions

Problem 3Q: Security A has an expected return of 7%, a standard deviation of returns of 35%, a correlation...

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We expect a return on the market of 11.400% and a risk-free rate
of 1.400%. We expect that in this market Discovery Cafe will
generate a return of 5.900%.
Thus we can calculate that Discovery Cafe has a beta of
and the risk premium in this market is
%.

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