# CAPM and Expected Return Problem

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CAPM and Expected Return. The following table shows betas for several companies. Calculate

each stock's expected rate of return using the CAPM. Assume the risk-free rate of interest

is 5 percent. Use a 9 percent risk premium for the market portfolio.

Company / Beta:

Cisco 2.03

Citigroup 1.36

Merck .40

Walt Disney .84

https://brainmass.com/business/capital-asset-pricing-model/capm-and-expected-return-problem-23818

#### Solution Preview

We use the CAPM formulea; Expected return = Risk Free rate + Beta* ...

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This solution helps with a problem regarding CAPM and expected return.

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