According to the CAPM,what is the market risk premium given an expected return on a security of 13.6%,a stock beta of 1.2,and a risk free interest rate of 4.0%?
A) 4.0%
B) 4.8%
C) 6.6%
D) 8.0%

Question

Quizplus · Accepted Answer

The CAPM formula is: Expected Return = Risk-Free Rate + Beta * Market Risk Premium. Rearranging to find the Market Risk Premium: Market Risk Premium = (Expected Return - Risk-Free Rate) / Beta = (13.6% - 4.0%) / 1.2 = 8.0%.

According to the CAPM,what Is the Market Risk Premium Given