Bobbi Manufacturing, Inc., is considering several investments. The rate on Treasury bills is currently 3.75 percent, and

Question:

Bobbi Manufacturing, Inc., is considering several investments. The rate on Treasury bills is currently 3.75 percent, and the expected return for the market is 10 percent. What should be the expected rates of return for each investment (using the CAPM)?

Security Beta

A ...........1.40

B ........... .75

C ........... .80

D ...........1.20

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...