Question: The return on the market is 9 . 0 % and the risk - free rate is 2 . 5 % . The investor is

The return on the market is 9.0% and the risk-free rate is 2.5%. The investor is conservative and his beta () is 0.80.
a) What is the required rate of return for this investment using the CAPM approach?
b) What if the () is 1.85, but the risk-free rate is 5% and the market return is 10.5%? What is the required rate of return for this investment?
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 The return on the market is 9.0% and the risk-free rate

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Solution We will use the Capital Asset Pricing Model CAPM formula Ri Rf beta Rm Rf Where Ri R... View full answer

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