At the beginning of 2014, Apple's beta was 1

Finance Dec 26, 2020

At the beginning of 2014, Apple's beta was 1.1 and the risk-free rate was about 4.7%. Apple's price was $82.93. Apple's price at the end of 2014 was $194.45. If you estimate the market risk premium to have been 5.2%, did Apple's managers exceed their investors' required return as given by the CAPM? The expected return was D%. (Round to two decimal places.)

Expert Solution

As per CAPM

expected return = risk-free rate + beta * (Market risk premium)

Expected return% = 4.7 + 1.1 * (5.2)

Expected return% = 10.42

Actual return=((last value/First value)^(1/Time between 1st and last value)-1)*100

=((194.45/82.93)^(1/1)-1)*100

= 134.47

Yes they exceeded

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