Explore BrainMass

Explore BrainMass

    Beta and required return calculation

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    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.

    © BrainMass Inc. brainmass.com June 4, 2020, 12:25 am ad1c9bdddf
    https://brainmass.com/business/beta-and-required-return-of-a-project/beta-required-return-calculation-337047

    Attachments

    Solution Preview

    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 ...

    Solution Summary

    Beta and required return calculation are provided.

    $2.19

    ADVERTISEMENT