Suppose the beta of Amazon is 2.2,the risk-free rate is 5.5%,and the market risk premium is 8%.Calculate the expected rate of return for Amazon.
A)15.8%
B)14.3%
C)35.2%
D)23.1%

Question

Quizplus · Accepted Answer

The expected rate of return can be calculated using the CAPM formula:

Expected Return = Risk-free Rate + Beta * Market Risk Premium

Expected Return = 5.5% + 2.2 * 8%

Expected Return = 5.5% + 17.6%

Expected Return = 23.1%

Therefore, the expected rate of return for Amazon is 23.1%. The correct answer is D.

Suppose the Beta of Amazon Is 2