Question

9. The risk-free rate and the expected market rate of return are 5.6% and 12.5%, respectively. According to the capital asset pricing model (CAPM), the expected rate of return on a security with a beta of 1.25 is equal to

Answer 1

21.2%

Step-by-step explanation:

CAPM = risk free rate +( beta x expected market return)

5.6% + (1.25 x 12.5%) = 21.2%