Question

Stock A has a risk premium of 7.2 percent. If Treasury bills yield 1.5 percent and the expected return on the market is 8.3 percent, what is the stock’s beta coefficient? Round your answer to two decimal places.

What is the required return on an investment with a beta of 0.8 if the risk-free rate is 2.2 percent and the return on the market is 8.9 percent? Round your answer to two decimal places.%
If the expected return on the investment is 11.8 percent, what should you do?
Since the expected return -Select-is (greater or less) than the required return, the individual -Select-(should or should not) make the investment

Answer 1

Step-by-step explanation:

CAPM: required return on equity = risk free rate + beta*(market risk premium)

market risk premium = expected market return - risk free rate

(7.2+1.5)=x(8.3-1.5)+1.5

x= 1.06

if this is wrong (as the term "risk premium" is kinda weird) try

x= .84

2.) 2.2+.8(8.9-2.2)= 7.56%

Since the expected return is greater you should buy it!