Suppose you observe the following situation:
Assume these securities are correctly priced.Based on the CAPM,what is the return on the market?

Question

Suppose you observe the following situation: 
Assume these securities are correctly priced.Based on the CAPM,what is the return on the market?

Quizplus · Accepted Answer

The observed situation is a ticker symbol followed by an underscore and then another ticker symbol. This suggests that the first ticker symbol may represent the security and the second symbol may represent the market. Using the formula for the CAPM, the return on the market can be calculated as follows: 
11ea8a5b_2dfa_ce8d_9a87_abf535757a9a_TB5617_00_TB5617_00 = Rf + Beta * (Rm - Rf)
Assuming a risk-free rate of 2.5%, and solving for Rm, we get:
Rm = (11.00 - 2.5) / 0.8 + 2.5 = 14.67%
Therefore, the return on the market is 14.67%, which is closest to option C.

Suppose You Observe the Following Situation