Asset P has a beta of 0.9. The risk-free rate of return is 8 percent, while the return on the market portfolio of assets is 14 percent. The asset's required rate of return is ________.
A) 13.4 percent
B) 22.0 percent
C) 15.4 percent
D) 6.0 percent

Question

Quizplus · Accepted Answer

The asset's required rate of return can be calculated using the Capital Asset Pricing Model (CAPM) formula: Required Return = Risk-Free Rate + Beta * (Market Return - Risk-Free Rate). Plugging in the given values: Required Return = 8% + 0.9 * (14% - 8%) = 8% + 0.9 * 6% = 8% + 5.4% = 13.4%.

Asset P Has a Beta of 0