The market risk premium is 4 per cent and, for a particular share, beta is 1.2. If the rates on government securities are 6 per cent, what is the required rate of return for the shares?

Question

Quizplus · Accepted Answer

The required rate of return for the shares can be calculated using the Capital Asset Pricing Model (CAPM):
Required rate of return = risk-free rate + beta*(market risk premium)
= 6% + 1.2*(4%) = 10.8%
Therefore, the correct answer is D.

The Market Risk Premium Is 4 Per Cent And, for a Particular