The historical returns for the last three years for Share B and the stock market portfolio are: Share B: 24%, 0%, 24%; Market portfolio: 10%, 12%, 20%. Calculate the required rate of return (cost of capital) for Stock B using the CAPM. (The risk-free rate of return = 4%).

Answer rating: 100% (QA)

SOLUTION The Capital Asset Pricing Model CAPM formula is r Rf beta x Rm Rf where r required rate of ... View the full answer