Ask Question
7 June, 13:27

Tar Heel Blue, Inc. has a beta of 1.8 and a standard deviation of 28%. The risk free rate is 1.5% and the market expected return is 7.8%. According to the CAPM, what is the expected return on Tar Heel Blue? Enter you answer without a % symbol (for example, if your answer is 8.9% then type 8.9).

+5
Answers (1)
  1. 7 June, 15:31
    0
    12.84

    Explanation:

    In this question, we use the Capital Asset Pricing Model (CAPM) formula which is shown below

    Expected rate of return = Risk-free rate of return + Beta * (Market rate of return - Risk-free rate of return)

    = 1.5% + 1.80 * (7.8% - 1.5%)

    = 1.5% + 1.80 * 6.3%

    = 1.5% + 11.34%

    = 12.84

    Since the standard deviation is not relevant. Hence, ignored it
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “Tar Heel Blue, Inc. has a beta of 1.8 and a standard deviation of 28%. The risk free rate is 1.5% and the market expected return is 7.8%. ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers