# Expected Rate of Return using CAPM.

Richland Manufacturing Inc. has prepared the following information

regarding two investments under consideration. Which investment should be accepted? Please show all calculations,formulas, and details and send it via Word document. Thank you.

COMMON STOCK A COMMON STOCK B

PROBABILITY RETURN PROBABILITY RETURN

.20 -2% .10 4%

.50 18% .30 6%

.30 27% .40 10%

.20 15%

https://brainmass.com/business/capital-asset-pricing-model/expected-rate-return-capm-256622

#### Solution Preview

Answer:

Given that,

Common stock A Common Stock B

Probability Return Probability ...

#### Solution Summary

The solutuon determines the expected rate of return using CAPM model to determine if the investment should be accepted.

$2.19