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    Question

    According to CAPM (Capital Asset Pricing Model), what is

    the required rate of return for a stock with a beta of 0.7 when the risk-free rate is 5% and the expected rate of return is 15% 
    A 15% Correct Answer Incorrect Answer
    B 12% Correct Answer Incorrect Answer
    C 14% Correct Answer Incorrect Answer
    D 13% Correct Answer Incorrect Answer
    E 11% Correct Answer Incorrect Answer

    Solution

    Required rate of return (CAPM Model) = 0.05 + 0.7 (0.15 – 0.05) = 0.05 + 0.07 = 0.12 ~ 12%

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