Using Solnik's (1974)ICAPM,what is the expected return on an Australian security with a world market beta of 1.2 if the Australian risk-free rate is 7%,the world risk-free rate is 3.5% and the expected return on the world market portfolio is 22%?

A)$ 23.0\% $
B) $ 25.2 \% $
C) $ 25.7 \% $
D) $ 29,20\% $

Question

Using Solnik's (1974)ICAPM,what is the expected return on an Australian security with a world market beta of 1.2 if the Australian risk-free rate is 7%,the world risk-free rate is 3.5% and the expected return on the world market portfolio is 22%?

A)$ 23.0\% $
B) $ 25.2 \% $
C) $ 25.7 \% $
D) $ 29,20\% $

Quizplus · Accepted Answer

Using equation 9.10,the expected return from the ICAPM is E(R_i)= 0.07 + 1.2(0.22 - 0.035)= 0.292 or 29.2%.

Using Solnik's (1974)ICAPM,what Is the Expected Return on an Australian 23.0% 23.0\% 23.0%

Using Solnik's (1974)ICAPM,what Is the Expected Return on an Australian $23.0\%$