# CAPM Model - Calculating Expected & Risk Free Return

Not what you're looking for? Search our solutions OR ask your own Custom question.

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?

Â© BrainMass Inc. brainmass.com December 24, 2021, 7:33 pm ad1c9bdddfhttps://brainmass.com/economics/risk-analysis/capm-model-calculating-expected-risk-free-return-198454

#### Solution Preview

Solution 1:

Ke=Krf+Beta*(Km-Krf)

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 Summary

Solution explains the steps in determining expected rate and risk free return using CAPM model.

$2.49