Suppose the MiniCD Corporation's ordinary equity has a return of 12%.Assume the risk-free rate is 4%,the expected market return is 9%,and no unsystematic influence affected Mini's return.The beta for MiniCD is:
A)0.89.
B)1.60.
C)2.40.
D)3.00.
E)It is impossible to calculate beta without the inflation rate.

Question

Quizplus · Accepted Answer

The capital asset pricing model (CAPM) can be used to calculate a company's beta, which measures its systematic risk relative to the overall market.

CAPM formula: 
r = Rf + β(Rm - Rf)

Where 
r = required return on the stock 
Rf = risk-free rate 
β = beta 
Rm = expected market return

Plugging in the given values:

12% = 4% + β(9% - 4%)

Solving for beta:

β = (12% - 4%) / (9% - 4%) = 1.6

Therefore, the answer is B.

Suppose the MiniCD Corporation's Ordinary Equity Has a Return of 12%.Assume