Homework:Unit 8 Lab Assignment

Question 19, P8-16 (similar to)

Part 1 of 4

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Part 1

(Using the CAPM to find expected returns) Sante Capital operates two mutual funds headquartered in Houston, Texas. The firm is evaluating the stock of four different firms for possible inclusion in its fund holdings. As part of their analysis, Sante's managers have asked their junior analyst to estimate the investor-required rate of return on each firm's shares using the CAPM and the following estimates: The rate of interest on short-term U.S. Treasury securities is currently

4.5

percent, and the expected return for the market portfolio is

10.5

percent. What should be the expected rates of return for each investment?

Security	Beta
A	1.48
B	0.65
C	1.22
D	0.93

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