Fill This Form To Receive Instant Help
Fill This Form To Receive Instant Help
Homework answers / question archive / Problem 4
Problem 4. XYZ company's share has a beta of 0.8. The risk-free rate is 4% and the expected return on the market is 10%. What is the required rate of return on XYZ's share?
| Using CAPM Model, | |
| Re = Rf + (Rm-Rf)*B | |
| Where, | |
| Re = Require return | |
| Rf = Risk free rate | |
| Rm = Market return | |
| B= Beta of the stock | |
| Therefore, | |
| Re = 4 + (10-4)*0.8 | |
| = 8.8% | |
| Therefore, | |
| required return of XYZ's share = 8.8% |
