• What are the critical assumptions of the capital assets pricing model (CAPM)? Give a   
•  brief description of each assumption.                                                                       
• The standard deviation of Cotton Printers company’s stock is 28% and its correlation coefficient with the market portfolio is 0.50. The market portfolio has an expected return of 16% and standard deviation of 20%
• What is the systematic risk (beta) of Cotton Printers stock?                                           
• What would happen to the systematic risk (beta) if Cotton Printers standard deviation were 40%?                                                                                                            
• What if correlation coefficient were 0.60?                                                                      
• Explain what portion is accounted for by systematic risk and by unsystematic risk 

 

Answer rating: 100% (QA)

Capital Asset pricing model CAPM helps to work out the required rate of return required by the investor in the form of equity investment The Capital Asset Pricing Model CAPM measures the risk of a sec... View the full answer