If the ICAPM beta is 0.8,and the world market return and risk-free rate are 12% and 5% respectively,then the expected return predicted by the ICAPM is:

A) $ 6.0 \% $
B) $ 8.8 \% $
C) $10.6 \% $
D) $ 12.4 \% $

Question

If the ICAPM beta is 0.8,and the world market return and risk-free rate are 12% and 5% respectively,then the expected return predicted by the ICAPM is:

A) $ 6.0 \% $
B) $ 8.8 \% $
C) $10.6 \% $
D) $ 12.4 \% $

Quizplus · Accepted Answer

Using equation 9.10,and the inputs provided,we can compute the expected return as follows: 0.05 + 0.8 (0.12 - 0.05)= 0.106 or 10.6%.

If the ICAPM Beta Is 0 6.0% 6.0 \% 6.0% B) 8.8% 8.8 \% 8.8%

If the ICAPM Beta Is 0 $6.0 \%$ B) $8.8 \%$