what is the value of Beta and expected rate of return for an investment is 0

Finance Aug 12, 2020

what is the value of Beta and expected rate of return for an investment is 0.148, and the a risk free rate of return of 4%, and a market rate of return of 10%. ked out of o Selecne: a. 1.85 Flag estion Fini b. 1.9 Tim c. 1.8 O d. 17

Expert Solution

Using CAPM approach for finding expected return, we can find beta as below

Expected rate of return is = Risk free rate of return+(Beta*(Market return-Risk free rate of return))

0.148=0.04+(Beta*(0.10-0.04))

0.148=0.04+(Beta*0.06)

(Beta*0.06)=(0.1480-0.04)

(Beta*0.06)=0.1080

Beta is = (0.1080/0.06)

Beta is = 1.80

Answer is Option c)

Archived Solution

Unlocked Solution

You have full access to this solution. To save a copy with all formatting and attachments, use the button below.

Already a member? Sign In

Important Note: This solution is from our archive and has been purchased by others. Submitting it as-is may trigger plagiarism detection. Use it for reference only.

For ready-to-submit work, please order a fresh solution below.

Or get 100% fresh solution

Get Custom Quote