Suppose the required rate of return on a portfolio with beta of 12 is 18 per cent and the risk-free is 6 per cent. According to the CAPM: 

(a) What is the expected rate of return on the market portfolio

 (b) What is the expected retum of a zero beta security ( Suppose you choose to buy a stock 2 for Rs 50, The stock is expected to pay Rs 2 as dividend ne year and is hoped to sell at Rs 53. The stock has been evaluated at B -0.5. Is the stock fairly prioed What is the implication of including stock Z in the portfolio? 

(d) A stock Delta, with beta of 15, sells for Rs 50. One year from now, it is expected to yield income of Rs 6.

What price do investors expect after one year?

Answer rating: 100% (QA)

a The Capital Asset Pricing Model CAPM states that the expected rate of return on a portfolio is equal to the riskfree rate plus the product of the ma... View the full answer