27. CAPM. The Treasury bill rate is 4%, and the expected return on the market portfolio is 12%. According to the capital asset pricing model: (LO12-2) a. What is the risk premium on the market? b. What is the required return on an investment with a beta of 1.5? c. If an investment with a beta of .8 offers an expected return of 9.8%, does it have a positive NPV? d. If the market expects a return of 11.2% from stock X, what is its beta?

27. CAPM. The Treasury bill rate is 4%, and the expected return on the market portfolio is 12%. According to the capital asset pricing model: (LO12-2) a. What is the risk premium on the market? b. What is the required return on an investment with a beta of 1.5? c. If an investment with a beta of .8 offers an expected return of 9.8%, does it have a positive NPV? d. If the market expects a return of 11.2% from stock X, what is its beta?

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter8: Risk And Rates Of Return

Section: Chapter Questions

Problem 14PROB

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