Assume the current risk premium is 6%,the risk-free rate of return is 3% and the beta of the equity market is 1.1.What is the discount rate based on the Capital Asset Pricing Model?

Name: Assume the current risk premium is 6%,the risk-free rate of return is 3% and the beta of the equity market is 1.1.What is the discount rate based on the Capital Asset Pricing Model?
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Quizplus · Accepted Answer

Using equation 12.5,we can calculate the discount rate based on the CAPM as follows,k_e = 0.03 + 1.1(0.06)= 0.096 = 9.6%.

Assume the Current Risk Premium Is 6%,the Risk-Free Rate of Return