Question

Monroe McIntyre has estimated the expected return for Bruehl Industries to be 10.50%. He notes the risk-free rate is 2.10% and the return of the market is 11.40%. Based on this information, he estimates Bruehl's beta to be:_________

Answer 1

Answer:Based on this information, he estimates Bruehl's beta to be:____0.88___

Step-by-step explanation:

Following the CAPM,Capital Asset Pricing Model formula, The expected

return on stock for Bruehl Industries is given as

Expected Return = Risk free Return + Market Risk Premium X Beta

or

Expected = Risk free rate + Beta x (Market rate - Risk free rate)

Where

Expected Return =10.50%

Risk free Rate= 2.10%,

Beta=??

market rate=11.40%

Expected = Risk free rate + Beta x (Market rate - Risk free rate)

10.25 = 2.10 + Beta ( 11.40- 2.10)

10.25-2.10= Beta (9.30)

8.15%/9.30%= Beta

Beta=0.876 rounded to 0.88

Based on this information, he estimates Bruehl's beta to be:____0.88_____