5) Asset P has a beta of 0.9. The risk-free rate of return is 8 percent, while the return on the market portfolio of assets is 14 percent. The asset's required rate of return is A) 13.4 percent B) 22.0 percent C) 15.4 percent D) 6.0 percent Answer: A

5) Asset P has a beta of 0.9. The risk-free rate of return is 8 percent, while the return on the market portfolio of assets is 14 percent. The asset's required rate of return is A) 13.4 percent B) 22.0 percent C) 15.4 percent D) 6.0 percent Answer: A

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter3: Risk And Return: Part Ii

Section: Chapter Questions

Problem 2Q: Security A has an expected rate of return of 6%, a standard deviation of returns of 30%, a...

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Concept explainers

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.

Question

Finance

5) Asset P has a beta of 0.9. The risk-free rate of return is 8 percent, while the return on the
market portfolio of assets is 14 percent. The asset's required rate of return is
A) 13.4 percent
B) 22.0 percent
C) 15.4 percent
D) 6.0 percent
Answer: A

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