The risk-free rate of return is 4% and the market risk premium is 8%.What is the expected rate of return on a share with a beta of 1.28?
A)9.12%
B)10.24%
C)13.12%
D)14.24%
E)15.36%

Question

Quizplus · Accepted Answer

The expected rate of return can be calculated using the Capital Asset Pricing Model (CAPM).
Expected rate of return = Risk-free rate + Beta x Market risk premium
Expected rate of return = 4% + 1.28 x 8%
Expected rate of return = 14.24% 
Hence, the expected rate of return on a share with a beta of 1.28 is 14.24%. Therefore, the correct answer is D) 14.24%.

The Risk-Free Rate of Return Is 4% and the Market