Given Gilbert's beta of 1.10 and a risk-free rate of 5 percent, what is the expected rate of return assuming a 10 percent market return?
A) 21.5 percent
B) 10.5 percent
C) 5.5 percent
D) 15.5 percent
E) 16.5 percent

Question

Quizplus · Accepted Answer

The expected rate of return can be calculated using the Capital Asset Pricing Model (CAPM) formula: Expected Return = Risk-Free Rate + Beta * (Market Return - Risk-Free Rate). Plugging in the given values: Expected Return = 5% + 1.10 * (10% - 5%) = 5% + 1.10 * 5% = 5% + 5.5% = 10.5%.

Given Gilbert's Beta of 1