Suppose the beta of Microsoft is 1.13, the risk-free rate is 3 percent, and the market risk premium is 8 percent. Calculate the expected return for Microsoft.
A)12.04 percent
B)15.66 percent
C)13.94 percent
D)8.65 percent

Question

Quizplus · Accepted Answer

The expected return for Microsoft can be calculated using the Capital Asset Pricing Model (CAPM):Expected return = Risk-free rate + Beta * Market risk premium= 3% + 1.13 * 8%= 3% + 9.04%= 12.04%

Suppose the Beta of Microsoft Is 1