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The rate of return

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Within the context of the CAPM assume: (1) the expected return on the market is 15%, the risk free rate of 8% the expected return pn Hennessy.com is 17% and the beta of Hennessy.com is 1.25.

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The rate of return is assessed for financial economics. CAPM context for the expected return is analyzed.

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5. The formula of CAPM is
E(R) = Rf + Beta * (Rm - Rf)
Where E(R) is the implied expected return rate on Hennessy
Rf = risk free rate = 8%
Rm = market return rate = 15%

Then E(R) = 8% + 1.25 * (15% - 8%) = 16.75%
However, expected return rate (depending on the current price) is 17%, higher than the calculated return rate. ...

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