Your estimate of the market risk premium is 6%. The risk-free rate of return is 4%, and General Motors has a beta of 1.6. According to the Capital Asset Pricing Model (CAPM), what is its expected return?

Name: Your estimate of the market risk premium is 6%. The risk-free rate of return is 4%, and General Motors has a beta of 1.6. According to the Capital Asset Pricing Model (CAPM), what is its expected return?
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Quizplus · Accepted Answer

C) Using the equation for the CAPM, expected return = 4% + (1.6 × 6%) = 13.6%

Your Estimate of the Market Risk Premium Is 6