If the risk free rate is 4%, the beta on Intel is 1.1, and the rate of return of the market portfolio is 12/5, what is the expected return on Intel?
A) 12.8%
B) 11.2%
C) 12%
D) 13.1

Question

Quizplus · Accepted Answer

The expected return on Intel can be calculated using the Capital Asset Pricing Model (CAPM):

Expected Return = Risk Free Rate + Beta * (Market Return - Risk Free Rate)

Using the given values:

Expected Return = 4% + 1.1*(12/5 - 4%) = 12.8%

Therefore, the best choice is A) 12.8%.

If the Risk Free Rate Is 4%, the Beta on Intel