請教一條功課 - rates of return

Chun Kit

2008-04-06 4:49 am

The expected return for the general market is 12.8 percent, and the risk premium in the market is 4.3 percent. Tasaco, LBM, and Exxos have betas of 0.864, 0.693, and 0.575, respectively. What are the appropriate required rates of return for the three securities?

回答 (1)

act_2_mon

2008-04-07 2:43 am

✔ 最佳答案

this is a typical CAPM question, which state,
E(Ri) = Rf + beta(im)[E(Rm) - Rf]
where E(Ri) is the expected return on the capital asset
Rf is the risk free interest rate
beta(im) is the sensitivity of asset returns to market returns
E(Rm) - Rf is known as the risk premium

The expect return for the general market is also the risk free rate.
Therefore, Rf = 0.128
Thus,

Tasaco,
E(Ri) = 0.128 + 0.864*0.043
= 0.165 or 16.5%
LBM,
E(Ri) = 0.128 + 0.693*0.043
= 0.158 or 15.8%
Exxos,
E(Ri) = 0.128 + 0.575*0.043
= 0.153 or 15.3%

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