A company has a beta of 0.50. If the market return is expected to be 12 percent and the risk-free rate is 5 percent, what is the company's required return?
A) 6.0 percent
B) 8.5 percent
C) 11.0 percent
D) 13.5 percent

Question

Quizplus · Accepted Answer

The company's required return can be calculated using the Capital Asset Pricing Model (CAPM) formula: Required Return = Risk-Free Rate + Beta * (Market Return - Risk-Free Rate). Plugging in the values: Required Return = 5% + 0.50 * (12% - 5%) = 5% + 0.50 * 7% = 5% + 3.5% = 8.5%.

A Company Has a Beta of 0