What is the expected return on an asset with a beta of 2.0,if the risk-free rate of interest is 5% and the expected return on the market portfolio is 10%?
A)12.5%
B)20%
C)10%
D)15%

Question

Quizplus · Accepted Answer

The expected return on the asset can be calculated using the Capital Asset Pricing Model (CAPM), which is:
Expected return = Risk-free rate + Beta * (Expected return on market - Risk-free rate)
= 5% + 2.0 * (10% - 5%)
= 15%
Therefore, the expected return on the asset is 15%. The correct answer is option D - 15%.

What Is the Expected Return on an Asset with a Beta