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) states that the expected return on a stock is equal to the risk-free rate plus the product of the stock's beta and the market risk premium. 
Using this formula, we can solve for MiniCD's beta as follows: 
12% = 4% + beta * (9% - 4%)
Simplifying, 
8% = beta * 5%
beta = 1.6 
Therefore, the answer is B, with a beta of 1.60.

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