# Working with risk and return for purchase of risky asset: beta coefficient of .85

If the required risk-free rate of return is estimated to be 4% and the expected rate of return on the market is 9%, what is the required rate of return on any risky asset held in a diversified portfolio when the asset's beta coefficient is 0.85?

© BrainMass Inc. brainmass.com June 3, 2020, 4:50 pm ad1c9bdddfhttps://brainmass.com/business/capital-asset-pricing-model/risk-return-purchase-risky-asset-5622

#### Solution Preview

To answer this question you could use the capital asset pricing model (CAPM). The CAPM equation is as follows:

ERi = Rf + (ERm - Rf)b

This states that the required rate of return (or the expected rate of return) of a risky asset 'i', ...

#### Solution Summary

The solution explains and computes the steps necessary to arrive at required rate of return on any risky asset.

$2.19