What is the risk-free rate of return if Asset X,with a beta of 1.5,has an expected return of 20 percent,and the expected market return is 15 percent?
A)5.0%
B)7.5%
C)15.0%
D)22.5%

Question

Quizplus · Accepted Answer

The risk-free rate can be calculated using the Capital Asset Pricing Model (CAPM): Expected Return = Risk-Free Rate + Beta * (Market Return - Risk-Free Rate). Plugging in the values: 20% = Risk-Free Rate + 1.5 * (15% - Risk-Free Rate). Solving this equation gives a risk-free rate of 5%.

What Is the Risk-Free Rate of Return If Asset X,with