What is the expected return on a share with a beta of 0.8, given a risk-free rate of 3.5% and an expected market return of 15.5%?
A)3.8%
B)13.1%
C)15.6%
D)19.1%

Question

Quizplus · Accepted Answer

The expected return on a share can be calculated using the Capital Asset Pricing Model (CAPM):
Expected Return = Risk-Free Rate + Beta x (Expected Market Return - Risk-Free Rate)
Plugging in the given values:
Expected Return = 3.5% + 0.8 x (15.5% - 3.5%) = 13.1%
Therefore, the answer is B.

What Is the Expected Return on a Share with a Beta