Use the following information to answer the question(s)below. All amounts are in millions.
-If the risk-free rate is 3% and the market risk premium is 5%,then the CAPM's predicted expected return for Wyatt Oil is closest to:

Question

Use the following information to answer the question(s)below.  All amounts are in millions.
-If the risk-free rate is 3% and the market risk premium is 5%,then the CAPM's predicted expected return for Wyatt Oil is closest to:

Quizplus · Accepted Answer

The CAPM formula is: Expected return = Risk-free rate + Beta * Market risk premium. Wyatt Oil's beta is not given, so we cannot calculate the exact expected return. However, we can use the information given to eliminate some of the choices. The risk-free rate is 3% and the market risk premium is 5%, so the expected return must be greater than 3%. Choice A is the only choice that is greater than 3%, so it must be the correct answer.

Use the Following Information to Answer the Question(s)below