Exhibit 14.11
Use the Information Below for the Following Problem(S)
$\begin{array}{lcc}
\text { Investment } & \text { Beta } & \text { Analyst's Estimated Return } \
\hline \text { Stock } \mathrm{X} & 2.3 & 15.5 \% \
\text { Stock } \mathrm{Y} & 1.2 & 13.6 \% \
\text { Market Portfolio } & 1.0 & 11.5 \%
\end{array}$

-Refer to Exhibit 14.11.What is the required rate of return for Stock X based on the capital asset pricing model (CAPM)?
A) 15.5%
B) 17.3%
C) 21.3%
D) 26.5%
E) 30.5%

Question

Exhibit 14.11
Use the Information Below for the Following Problem(S)
 $\begin{array}{lcc}
\text { Investment } & \text { Beta } & \text { Analyst's Estimated Return } \
\hline \text { Stock } \mathrm{X} & 2.3 & 15.5 \% \
\text { Stock } \mathrm{Y} & 1.2 & 13.6 \% \
\text { Market Portfolio } & 1.0 & 11.5 \%
\end{array}$

-Refer to Exhibit 14.11.What is the required rate of return for Stock X based on the capital asset pricing model (CAPM)?
A) 15.5%
B) 17.3%
C) 21.3%
D) 26.5%
E) 30.5%

Quizplus · Accepted Answer

Required return = 0.04 + 2.3(0.115 - 0.04)= 0.04 + 2.3(0.075)= 0.2125 or 21.3%

Exhibit 14 -Refer to Exhibit 14