If a share has a beta coefficient, ($\beta$)., equal to 1.20, the risk premium associated with the market is 9 percent, and the risk-free rate is 5 percent, application of the capital asset pricing model indicates the appropriate return should be __________.

Question

Quizplus · Accepted Answer

The CAPM formula is: 
Expected Return = Risk-Free Rate + Beta x (Market Risk Premium)
Expected Return = 5% + 1.20 x 9% 
Expected Return = 15.8%

If a Share Has a Beta Coefficient, β\betaβ ), Equal to 1

If a Share Has a Beta Coefficient, $\beta$ ), Equal to 1