The Treasury bill rate is 6%, and the expected return on the market portfolio is 14%. According to the capital asset pricing model: a. What is the risk premium on the market? b. What is the required return on an investment with a beta of 1.4? c. If an investment with a beta of 0.6 offers an expected return of 8.4%, does it have a positive or negative NPV? d. If the market expects a return of 11.6% from stock X, what is its beta?

The Treasury bill rate is 6%, and the expected return on the market portfolio is 14%. According to the capital asset pricing model: a. What is the risk premium on the market? b. What is the required return on an investment with a beta of 1.4? c. If an investment with a beta of 0.6 offers an expected return of 8.4%, does it have a positive or negative NPV? d. If the market expects a return of 11.6% from stock X, what is its beta?

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter6: Risk And Return

Section: Chapter Questions

Problem 14P: You have observed the following returns over time: Assume that the risk-free rate is 6% and the...

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