Capital Asset Pricing Model (CAPM) is one of the finance techniques that are used frequently to compute expected return from financial investments

Answer:
a) Return of this investment = 22%

b) Means a 1% change in market bring about .80 change in the expected rate of interest.

c) Value of beta of market is '1'

d)

Solution:

a) Given:

Risk-free rate of return = 10%

Return in market = 25%

 = 0.80

Expected rate of return = risk-free rate of return +  (return from market - risk-free rate of return

= 10% + 0.80(25%-10%)

= 22%

return of this investment = 22%

b) Value of beta in our case is 0.80, this means that with a 1% change in market return changes the expected rate of return by 0.80.

c) The value of beta of market is '1'.

d) the value of market beta is a standard of '1' as the change in a value in respect to itself is equal to '1'.