Intro

Use the required return$-$beta equation from the CAPM.

Part $1$

What is the required return if the risk$-$free rate is $1\%,$ beta $1\mathrm{.}4$ and the expected

market return $8\%?$

Correct

$E(r)=r_f+(E(r_M)-r_f)$

$=0\mathrm{.}01+1\mathrm{.}4(0\mathrm{.}08-0\mathrm{.}01)$

$=0\mathrm{.}108$

Part $2$

What is the risk$-$free rate if beta is $1\mathrm{.}1,$ the required return $8\mathrm{.}4\%$ and the expected

market return $8\%?$

Part $3$

What is beta if the risk$-$free rate is $1\%,$ the required return $11\%$ and the expected

market return $8\%?$

Part $4$

What is the expected market return if the risk$-$free rate is $1\%,$ beta $1\mathrm{.}4$ and the

required return $11\%?$