CAPM Required Return A company has a beta of 3.75. If the market return is expected to be 20 percent and the risk-free rate is 9.5 percent, what is the company's required return?
A) 33.250%
B) 39.375%
C) 48.875%
D) 55.625%

Question

Quizplus · Accepted Answer

The required return can be calculated using the CAPM formula: Required Return = Risk-Free Rate + Beta * (Market Return - Risk-Free Rate). Substituting the given values: 9.5% + 3.75 * (20% - 9.5%) = 48.875%.

CAPM Required Return a Company Has a Beta of 3