CAPM Required Return A company has a beta of 3.25. If the market return is expected to be 14 percent and the risk-free rate is 5.5 percent, what is the company's required return?
A) 22.750%
B) 33.125%
C) 45.500%
D) 51.000%

Question

Quizplus · Accepted Answer

The required return is calculated using the CAPM formula: Required Return = Risk-Free Rate + Beta * (Market Return - Risk-Free Rate). Substituting the given values: 5.5% + 3.25 * (14% - 5.5%) = 33.125%.

CAPM Required Return a Company Has a Beta of 3