A) Find the Expected Rate of Return on the Market Portfolio given that the Expected Rate of Return on Asset "i" is 10%, the Risk-Free Rate is 3%, and the Beta for Asset "i" is 1.5.
B) Find the Risk-Free Rate given that the Expected Rate of Return on Asset "j" is 14%, the Expected Return on the Market Portfolio is 12%, and the Beta for Asset "j" is 1.5.
Also, how do you figure out risk free rate?© BrainMass Inc. brainmass.com October 9, 2019, 9:49 pm ad1c9bdddf
ke is expected rate of return =10%
krf is return on risk free asset = 3%
Km is expected market return = ?
Beta = 1.5
Put these values in equation and get
0.1 = ...
Solution explains the steps in determining expected rate and risk free return using CAPM model.