1. Capital Asset Pricing Model: If the expected return on the market is 13.47 percent and the...

Question:

1. Capital Asset Pricing Model: If the expected return on the market is 13.47 percent and the risk-free rate is 4 percent, what is the expected return for a stock with a beta equal to 1.75? (Carry out calculations to 4 decimal places (e.g., 14.26%, which is 0.1426)

2. What is the market risk premium for the set of circumstances described? (Write answer in decimals rounded to two decimals. (e.g., 14.26%, which is 0.1426)?)

Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these...