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Expected Return

Explain and work in excel

Expected return on the market portfolio is 17.7 percent and risk free rate is 4.1 percent.
Edward Jones has a beta of 1.6. Under CAPM

A. what is the expected return on Edward Jones stock
B. If risk free rate decreases to 3 percent, what is the expected return on Edward Jones stock.

Solution Preview

Hello

Please see the calculations as shown below

Under CAPM the expected return = risk free rate + beta *(expected market return ...

Solution Summary

Formula and calculation for expected Return under CAPM is given in solution.

$2.19