Suppose the MiniCD Corporation's common stock 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. 12 = 4 + β(9 - 4); 8 = 5β; β = 8/5 = 1.60

Question

Quizplus · Accepted Answer

Using the Capital Asset Pricing Model (CAPM), we can find the beta for MiniCD by solving for it in the equation: 
12% = 4% + beta(9% - 4%)

Simplifying, we get: 
8% = 5%beta

Dividing both sides by 5%, we get: 
beta = 1.6

Therefore, the beta for MiniCD is 1.6, which is option B.

Suppose the MiniCD Corporation's Common Stock Has a Return of 12