If you expect a market return of 10% and a risk-free rate of 5%, the required rate of return on an investment with a beta value of 0.5 is:
A) 5%.
B) 7.5%.
C) 10%.
D) 12.5%.

Name: If you expect a market return of 10% and a risk-free rate of 5%, the required rate of return on an investment with a beta value of 0.5 is: A) 5%. B) 7.5%. C) 10%. D) 12.5%.
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Quizplus · Accepted Answer

Using the Capital Asset pricing Model (CAPM), the required rate of return is 0.05 + 0.5 (0.1 F1F1F1S1?F1F1F10 0.05) = 0.05 + 0.025 = 0.075 or 7.5%.

If You Expect a Market Return of 10% and a Risk-Free