Stock A has a beta of 0.5, and investors expect it to return 3%. Stock B...

50.1K

Verified Solution

Question

Finance

Stock A has a beta of 0.5, and investors expect it to return 3%.Stock B has a beta of 1.5, and investors expect it to return 5%.Use the CAPM to calculate the market risk premium and the expectedrate of return on the market. (Enter your answers as a wholepercent.)
Market Risk Premium : __ %
Expected market rate of return _ %

Answer & Explanation Solved by verified expert

4.1 Ratings (557 Votes)

Given that stock A has a beta of 05 and investors expect it to return 3 Stock B has a beta of 15 and investors expect it to return 5 Expected returnRisk free rateBetaExpected market rate of returnRisk free rate See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

Stock A has a beta of 0.5, and investors expect it to return 3%.Stock B has a beta of 1.5, and investors expect it to return 5%.Use the CAPM to calculate the market risk premium and the expectedrate of return on the market. (Enter your answers as a wholepercent.)Market Risk Premium : ____ %Expected market rate of return ___ %