A company has a beta of 3.75. If the market return is expected to be 20 percent and the risk-free rate is 9.5 percent, what is the company's required return?
A) 33.250 percent
B) 39.375 percent
C) 48.875 percent
D) 55.625 percent

Question

Quizplus · Accepted Answer

The required return can be calculated using the Capital Asset Pricing Model (CAPM): Required Return = Risk-Free Rate + Beta * (Market Return - Risk-Free Rate). Plugging in the values: 9.5% + 3.75 * (20% - 9.5%) = 48.875%.

A Company Has a Beta of 3