Suppose the beta of ExxonMobil is 0.65, the risk-free rate is 4 percent, and the expected market rate of return is 14 percent. Calculate the expected rate of return on ExxonMobil.
A)12.6 percent
B)10.5 percent
C)13.1 percent
D)6.5 percent

Question

Quizplus · Accepted Answer

The expected rate of return on ExxonMobil can be calculated using the Capital Asset Pricing Model (CAPM) formula: Expected Return = Risk-Free Rate + Beta * (Market Return - Risk-Free Rate). Plugging in the given values: Expected Return = 4% + 0.65 * (14% - 4%) = 4% + 0.65 * 10% = 4% + 6.5% = 10.5%.

Suppose the Beta of ExxonMobil Is 0