Calculate the expected return for F Inc., which has a beta of 1.3 when the risk-free rate is 0.06 and you expect the market return to be 0.125.
A) 12.65 percent
B) 13.55 percent
C) 14.45 percent
D) 15.05 percent
E) 16.34 percent

Question

Quizplus · Accepted Answer

The expected return can be calculated using the Capital Asset Pricing Model (CAPM): Expected Return = Risk-free rate + Beta * (Market return - Risk-free rate). Plugging in the values: 0.06 + 1.3 * (0.125 - 0.06) = 0.1445 or 14.45 percent.

Calculate the Expected Return for F Inc