Question

What is the beta of msft? [hint: look under "key statistics"]. if the risk-free rate (rf) is 5% and the market risk premium e[rm-rf] is 6%, what is the required rate of return on msft according to the capm?

Answer 1

Answer: The beta of MSFT is 1.05. The security market line of the CAPM tells us that the required rate of return is given by: E [ R MSFT ] = R f + β MSFT ( E [ R M - R f ]) = . 04 + 1 . 05 × . 06 = 10 . 3%