If the risk free rate is 5%, the beta is .8, and the rate of return for the S&P 500 is 14%, what is the expected return?
A) 9.9%
B) 11.7%
C) 12.2%
D) 15%

Name: If the risk free rate is 5%, the beta is .8, and the rate of return for the S&P 500 is 14%, what is the expected return? A) 9.9% B) 11.7% C) 12.2% D) 15%
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Question

Quizplus · Accepted Answer

The expected return is calculated using the Capital Asset Pricing Model (CAPM): Expected return = Risk-free rate + Beta * (Market return - Risk-free rate) = 5% + 0.8 * (14% - 5%) = 12.2%

If the Risk Free Rate Is 5%, the Beta Is