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Homework answers / question archive / what is the value of Beta and expected rate of return for an investment is 0
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
| 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) |
