The beta of RicciCo.'s share is 3.2, whereas the risk-free rate of return is 9 per cent. If the expected return on the market is 18 per cent, then what is the expected return on RicciCo.?
A) 28.80%
B) 37.80%
C) 48.60%
D) 57.60%

Question

Quizplus · Accepted Answer

The expected return on RicciCo can be calculated using the CAPM formula:
Expected return on RicciCo = Risk-free rate + Beta(Risk premium)
= 9% + 3.2(18% - 9%)
= 9% + 28.8%
= 37.8%
Therefore, the expected return on RicciCo is 37.8%, which is option B.

The Beta of RicciCo