Beta and required return calculation
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The riskless return is currently ^%, and Chicago Gear has estimated the contingent returns given here.
a. Calculate the expected returns on the stock market and on Chicago Gear stock.
b. What is Chicago Gear's beta?
c. What is Chicago Gear's required return according to the CAPM?
see attached for table.
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Beta and required return calculation are provided.
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a) calculating expected return,
E(market) = 0.2 X -0.1 + 0.35 X 0.1 + 0.3 X 0.15 + 0.15 X 0.25 = 0.0975 or 9.75%
E(CG) = 0.2 X -0.15 + 0.35 X 0.15 + 0.3 X 0.25 + 0.15 X 0.35 = 0.15 or ...
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