Adequate information: T bill rate = 4% Market risk premium = 6% Beta of $1 Discount store = 1.5 Beta of Everything $5 = 1.0 To compute: Expected return of $1 Discount store and everything $5 as per CAPM Introduction: Expected return of the security as per CAPM is given by: Expected return = Risk free rate + Beta of the security X Market risk premium

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Chapter 9, Problem 4PS

Summary Introduction

Adequate information:

T bill rate = 4%

Market risk premium = 6%

Beta of $1 Discount store = 1.5

Beta of Everything $5 = 1.0

To compute:

Expected return of $1 Discount store and everything $5 as per CAPM

Introduction:

Expected return of the security as per CAPM is given by:

Expected return = Risk free rate + Beta of the security X Market risk premium

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