The return on the market portfolio is currently 13%.Battmobile Corporation stockholders require a rate of return of 21%,and the stock has a beta of 3.5.According to CAPM,determine the risk-free rate.
A)7%
B)14.7%
C)9.8%
D)24.2%

Question

Quizplus · Accepted Answer

According to the CAPM formula: Required Return = Risk-Free Rate + Beta * (Market Return - Risk-Free Rate). Plugging in the values: 21% = Risk-Free Rate + 3.5 * (13% - Risk-Free Rate). Solving for the Risk-Free Rate gives 9.8%.

The Return on the Market Portfolio Is Currently 13