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Question

For each of the cases given in the below table, use the capital asset pricing model to determine the required return.

$\begin{array}{cccc} \text { Case } & \begin{array}{c} \text { Risk-free } \\ \text { rate, } R_F \end{array} & \begin{array}{c} \text { Market } \\ \text { return, } r_m \end{array} & \text { Beta, } b \\ \hline \text { A } & 5 \% & 8 \% & 1.30 \\ \text { B } & 8 & 13 & 0.90 \\ \text { C } & 9 & 12 & -0.20 \\ \text { D } & 10 & 15 & 1.00 \\ \text { E } & 6 & 10 & 0.60 \end{array}$

Solution

VerifiedAnswered 1 year ago

Answered 1 year ago

Step 1

1 of 8In this problem, we are asked to determine the required return using the CAPM.

The inputs are given in the table from the exercise.

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