The beta coefficient for security-DTX is 1

Finance Jun 06, 2021

The beta coefficient for security-DTX is 1.34. If the market risk premium is 14.81% and the government bond yields 10%, find the expected return from the security-DTX using the CAPM.

[Round the final answer to two decimal places. If your answer is 12.34%, write only 12.34.]

Expert Solution

Computation of Expected Return from the Security-DTX using the CAPM:

Expected Return = Risk-free Rate + Beta*Market Risk Premium

= 10% + 1.34*14.81%

= 10% + 19.85%

Expected Return = 29.85% or 29.85

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