Answered: A project has an assigned beta of 1.24,…

A project has an assigned beta of 1.24, the risk-free rate is 3.8%, and the market rate of return is 9.2%. What is the project's expected rate of return? A. 15.21% B. 11.41% C. 10.50% D. 14.61%

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 5TP: Giorgio Co. is looking at an investment project with an internal rate of return of 10.8%. The...

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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

A project has an assigned beta of 1.24, the
risk-free rate is 3.8%, and the market rate of
return is 9.2%. What is the project's
expected rate of return?
A. 15.21%
B. 11.41%
C. 10.50%
D. 14.61%

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