Question
Asked Nov 3, 2019
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The common stock of Up-Towne Movers is selling for $33 a share and has a beta of 1.25. If the CAPM expected return is 15.5% and the market risk premium is 10.0%, what is the risk free rate of return?
 
Group of answer choices
2.0%
3.0%
12.5%
13.5%
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Expert Answer

Step 1

Calculate the risk-free ...

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r=r+Bxp 15.5%=r+1.25x10% =r,+0.125 0.155-0.125 0.03 or 3%

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