Suppose you observe the following situation: Assume these securities are correctly priced.Based on the CAPM,what is the return on the market?
A)13.99 percent
B)14.42 percent
C)14.67 percent
D)14.78 percent
E)15.01 percent

Question

Suppose you observe the following situation:  Assume these securities are correctly priced.Based on the CAPM,what is the return on the market?
A)13.99 percent 
B)14.42 percent 
C)14.67 percent 
D)14.78 percent 
E)15.01 percent

Quizplus · Accepted Answer

R_f: (0.12 - R_f)/0.8 = (0.16 - R_f)/1.1; R_f = 1.33 percentR_M: 0.12 = 0.0133 + 0.8(R_M - 0.0133); R_M = 14.67 percent

Suppose You Observe the Following Situation: Assume These Securities