CAPM Required Return A company has a beta of 0.50.If the market return is expected to be 12 percent and the risk-free rate is 5 percent,what is the company's required return?
A)6.0 percent
B)8.5 percent
C)11.0 percent
D)13.5 percent

Question

Quizplus · Accepted Answer

The required return can be calculated using the CAPM formula: R = Rf + beta x (Rm - Rf). Plugging in the given values, we get R = 0.05 + 0.50 x (0.12 - 0.05) = 0.085 or 8.5%. Therefore, the best choice is B.

CAPM Required Return a Company Has a Beta of 0