Question

Your estimate of the market risk premium is 9​%. The​ risk-free rate of return is 3.7​% and General Motors has a beta of 1.7. According to the Capital Asset Pricing Model​ (CAPM), what is its expected​ return?

Answer 1

19%

Step-by-step explanation:

The market risk premium is 9%

The risk free rate of return is 3.7%

General motors have a beta of 1.7

Therefore, using the capital asset pticing model the expected return can be calculated as follows

= 3.7% + 1.7×9%

= 3.7% + 15.3%

= 19%

Hence the expected return is 19%