Estimate the required return on Baniff Corp under the following conditions: The average stock is returning 11%
Short term treasury bills yield 5%
Baniff's beta is 1.25
A)11.00%
B)17.25%
C)12.50%
D)6.00%

Question

Quizplus · Accepted Answer

The required return on Baniff Corp can be estimated using the Capital Asset Pricing Model (CAPM), which is given by the formula: Required Return = Risk-Free Rate + Beta * (Market Return - Risk-Free Rate). Plugging in the given values: Required Return = 5% + 1.25 * (11% - 5%) = 5% + 1.25 * 6% = 5% + 7.5% = 12.5%.

Estimate the Required Return on Baniff Corp Under the Following