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    CAPM Calculation

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    The 30 year treasury bond market rate is 5%, the stock market premium is 6%, and a company's beta is 1.5. Use the CAPM to calculate the required return for that company's stock; then explain the logic of this calculation.

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    Solution Preview

    Kc = Rf + beta x ( Km - Rf )

    Kc is the risk-adjusted discount rate (also known as the Cost of Capital);
    Rf is the rate of a "risk-free" ...

    Solution Summary

    The CAPM is used to calculate the required return for a company's stock. The logic of this calculation is also explained.