For each of the cases shown in the following table, use the capital asset pricing model (CAPM) to find the required return and explain your answer. Case Risk-free rate Market return Beta (%) 5 (%) 8 A 1.3 В 8. 13 0.9 C 9. 12 -0.2 D 10 15 1.0 E 10 0.6
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- Capital asset pricing model (CAPM) For the asset shown in the following table, use the capital asset pricing model to find the required return. (Click on the icon here O in order to copy the contents of the data table below into a spreadsheet.) ne Risk-free Market rate, R return, rm Beta, b nts 4% 0.7 1% The required return for the asset is %. (Round to two decimal places.) eТext edia Librai ial Calculat er Resource Enter your answer in the answer box and then click Check Answer. Check Answer mic Study ules Clear All All parts showing 10: DExercise(14); ools > This course (Introduction to Finance (FIN-101-D02) Distance Spring 2021) is hased on Zutter/Smart Princinles of Managerial Finance Rrief Re 4/13 O Type here to search insertCapital asset pricing model (CAPM) For the asset shown in the following table, use the capital asset pricing model to find the required return. (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Risk-free rate, RF 1% The required return for the asset is %. (Round to two decimal places.) C Market return, m 5% Beta, b 0.5Consider a two-factor Arbitrage Pricing Theory (APT) model, T; = a; + b1,ifı + b2.i f2 + €i, with the following information Asset i Asset 1 0.07 0.50 0.25 Asset 2 0.15 1.10 0.75 Asset 3 0.20 b1,3 Hi b1i b2i 1.0 and the risk-free rate rp is 0.025. (a) Find the value of b13 to preclude arbitrage opportunity. (b) is an Asset 4 with 4 = 0.13, b14 = 0.8, and b2.4 = 0.4. Explain how you would exploit an arbitrage opportunity if there
- Capital asset pricing model (CAPM) For the asset shown in the following table, use the capital asset pricing model to find the required return. (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Risk-free rate, RF 5% Market return, m 10% ****** The required return for the asset is%. (Round to two decimal places.) Beta, b 0.6K Capital asset pricing model (CAPM) For the asset shown in the following table, use the capital asset pricing model to find the required return. (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Risk free rate, Re 2% The required return for the asset is (Round to two decimal places) Market return, f 8% CONTE Beta, b 0.2Capital Asset Pricing Model (CAPM) - Risk Free rate Risk free rate (Rf)* Beta (B)* 1.10 Market risk premium* 7.00% Expected return (ER) 10.20%
- Explain the following terms in the Capital Asset Pricing Model (CAPM): 1. Risk-Free Rate 2. Beta 3. Equity Risk Premium 4. Market Rate of Return 5. Market Risk PremiumCapital Asset Pricing Model (CAPM) - Based on Market Risk Premium Risk free rate (Rf)* 3.00% Beta (B)* Market risk premium* Expected return (ER) 1.50 10.00%For each of the cases shown in the following table, use the capital asset pricing model to find the required return. case risk free rate market return beta A 5% 8% 1.30 B 8% 13% 0.90 C 9% 12% -0.20 D 10% 15% 1.00 E 6% 10% 0.60 (solve using excel)
- A. Realized return B. Ex ante alpha C. Ex post alpha D. Realized beta Question 7 (MCQ) One example of a build up model is: A. A macroeconomic model B. Capital Asset Pricing Model (CAPM) C. Bond yield plus risk premium D. Fama and French model4. Explain what the Capital Asset Pricing Model (CAPM) is and calculate and explain the result of the CAPM based on the following data. a. Expected Return: 8% b. Risk-free rate: 4% c. Beta of the investment: 1.2 ER=Rf+B(ERm - Rf) where: ER = expected return of investment Rf risk-free rate B;= beta of the investment - (ERm - Rf) = market risk premiumAn efficient capital market is best defined as a market in which security prices reflect which one of the following? Multiple Choice A Current inflation B A risk premium C All available information D The historical arithmetic rate of return E The historical geometric rate of return