Katherine Hadad is wondering how much risk she must undertake to generate an acceptable return on her

Question:

Katherine Hadad is wondering how much risk she must undertake to generate an acceptable return on her portfolio. The risk-free return currently is 5 percent. The return on the average stock (market return) is 16 percent. Use the CAPM to calculate the beta coefficient associated with each of the following portfolio returns.

a. 10 percent

b. 15 percent

c. 18 percent

d. 20 percent

e. Katherine is risk-averse. What is the highest return she can expect if she is un- willing to take more than an average risk?

Beta Coefficient
Beta coefficient is a measure of sensitivity of a company's stock price to movement in the broad market index. It is an indicator of a stock's systematic risk which is the undiversifiable risk inherent in the whole financial system. Beta coefficient... Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...