Explore BrainMass

Explore BrainMass

    CAPM Calculation

    Not what you're looking for? Search our solutions OR ask your own Custom question.

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

    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.

    © BrainMass Inc. brainmass.com March 4, 2021, 7:43 pm ad1c9bdddf

    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.