Business Homework Solutions
#99074
Assume the capital-asset-pricing model holds. Based on the CAPM, what is the risk-free rate? What is the expected return on the market portfolio?
Consider the following two stocks:
Beta Expected Return
Merck Pharmaceutical 1.4 25%
Pizer Drug Corp 0.7 14%
Assume the capital-asset-pricing model holds. Based on the CAPM, what is the risk-free rate? What is the expected return on the market portfolio?
The solution calculates risk-free rate and the expected return on the market portfolio using CAPM (capital-asset-pricing model) and given betas and expected returns of two stocks.
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Pushkal Kumar Pandey, MBA - 4.9/5
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- 99074-finance-CAPM.xls
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