Ch $03$: Assignment $-$ Risk and Return: Part II

Which of the following are assumptions of the Capital Asset Pricing Model $($CAPM$)?$ Check all that apply.

There are no taxes.

All investors focus on a single holding period.

Asset quantities are given and fixed.

There are transaction costs.

Consider the equation for the Capital Asset Pricing Model $($CAPM$)$:

hat$(r_1)=r_{RF}+((hat(r_M))-r_{RF})\frac{\text{C}\text{o}\text{v}(r_i,r_M)}{{}_M^2}$

In this equation, the term $((hat(r_M))-r_{RF})\frac{\text{C}\text{o}\text{v}(r_i,r_M)}{{}^{2}M}$ represents th $lon$

Suppose that the market's average excess return on stocks is $10\mathrm{.}00\%$ and that the risk$-$free rate is $3\mathrm{.}00\%.$ Complete the following table by computing expected returns to stocks for each beta coefficient using the Capital Asset Pricing Model $($CAPM$)$:

$\backslash$table$[[b_i,$Expected Return to Stocks $(\%)],[-0\mathrm{.}30,],[0\mathrm{.}50,],[1\mathrm{.}00,],[5\mathrm{.}00,]]$