1a. If the beta of Amazon.com is 2.2, risk-free rate is 5.5% and the market risk premium is 8%, calculate the expected rate of return for Amazon.com stock:

A. 15.8%
B. 14.3%
C. 35.2%
D. 23.1%

1b.If the beta of Exxon Mobil is 0.65, risk-free rate is 4% and the market rate of return is 14%, calculate the expected rate of return from Exxon:
A. 12.6%
B. 10.5%
C. 13.1%
D. 6.5%

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1a. If the beta of Amazon.com is 2.2, risk-free rate is 5.5% and the market risk premium is 8%, calculate the expected rate of return for Amazon.com stock:

A. 15.8%
B. 14.3%
C. 35.2%
D. 23.1%

Answer: D. 23.1%

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Solution Summary

Calculates Expected Rate of Return using Capital Asset Pricing Model (CAPM)

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CAPM and EXPECTEDRETURN: The following table shows betas for several companies. How do I calculate each stock's expectedrate of returnusing the CAPM. Assuming the risk-free rate of interest is 5 percent. Using a 9 percent risk premium for the market portfolio.
Company BETA
Cisco 2.03
CitiGr

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is 5 percent. Use a 9 percent risk premium for the market portfolio.
Company / Beta:
Cisco 2.03
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Please show all calculations, formulas, and details and send it via Word do

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The market capitalization for X Corporation is $10 billion.
The estimated beta for its new project is 1.25
The treasury bill rate is 5%
The project's IRR is 14%
The expectedrate of return on the S&P 500 is 13%.
What is the expectedreturn on the project usingCAPM?
(Assume no taxes)
A) 13%
B) 14.6%
C) 15%
D) 16.25

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