Risk Free Rate and Market Risk Premium
Not what you're looking for?
1. Risk- Free Rate
A stock has an expected return of 14 percent, a beta of 1.70, and the expected return on the market is 10 percent. What must the risk-free rate be?
Risk-Free Rate = ?
2. Market Risk Premium
A stock has a beta of .8 and an expected return of 13 percent. If the risk-free rate is 4.5 percent, what is the market risk premium?
Market risk premium = ?
Please show the calculation along with the answer.
Purchase this Solution
Solution Summary
The solution calculates the Risk Free Rate and Market Risk Premium, using CAPM.
Solution Preview
CAPM Formula: Required Return = risk free rate + beta * (expected return on market - risk free rate)
1. Given,
Required return = 14% ; beta = 1.70 ; expected return on market = 10%. In put these ...
Purchase this Solution
Free BrainMass Quizzes
SWOT
This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.
Operations Management
This quiz tests a student's knowledge about Operations Management
Organizational Behavior (OB)
The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.
Employee Orientation
Test your knowledge of employee orientation with this fun and informative quiz. This quiz is meant for beginner and advanced students as well as professionals already working in the HR field.
Understanding Management
This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.