CAPM Required Return A company has a beta of 3.25.If the market return is expected to be 14 percent and the risk-free rate is 5.5 percent,what is the company's required return?
A)22.750 percent
B)33.125 percent
C)45.500 percent
D)51.000 percent

Question

Quizplus · Accepted Answer

The CAPM formula is:

Required return = risk-free rate + beta * (market return - risk-free rate)

Plugging in the given values, we get:

Required return = 5.5% + 3.25 * (14% - 5.5%) = 33.125%

Therefore, the correct answer is B.

CAPM Required Return a Company Has a Beta of 3