CAPM Required Return A company has a beta of 3.75.If the market return is expected to be 20 percent and the risk-free rate is 9.5 percent,what is the company's required return?
A)33.250 percent
B)39.375 percent
C)48.875 percent
D)55.625 percent

Question

Quizplus · Accepted Answer

The CAPM formula is:

Required return = risk-free rate + beta * (market return - risk-free rate)

Plugging in the given values:

Required return = 9.5% + 3.75 * (20% - 9.5%)

Required return = 48.875%

Therefore, the best choice is C) 48.875 percent.

CAPM Required Return a Company Has a Beta of 3