The risk-free rate is 4.15 percent. What is the expected risk premium on this stock given the following information? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Probability of State of the Economy State of Economy 0.35 Rate of Return if State Occurs Boom 16% Normal 14% 0.65

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Q: Consider the following information: Rate of Return If State Occurs State of Probability of State of…

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Q: The risk-free rate of return is 3.7 percent and the market risk premium is 6.2 percent. What is the…

A: The given question can be solved using capital asset pricing model (CAPM)

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A: Hi There, Thanks for posting the question. As per Q&A guidelines, the solution for first three…

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A: Stock beta = 0.90 Risk free rate = 5.5% Market return = 10%

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Q: If the risk free rate is 4 9%, the expected return on the market portfolio is 1296 and the beta of…

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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.