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borteleto borteleto
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Posts: 2477
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6 years ago
Security A has an expected rate of return of 29.8 percent and a beta of 3.1. Security B has a beta of 1.70. If the Treasury bill rate is 5 percent, what is the expected rate of return for Security B?
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wrote...
#1
6 years ago
 Use A to determine the market risk premium.

.298 = .05 + 3.1(market return - .05)
.248 = (3.1  market return) - .155
.403/3.1 = .13 = market return
Return on B = .05 + 1.7(.13 - .05) = .186 = 18.6%
 
borteleto Author
wrote...
#2
6 years ago
Oh god, I was lost before coming here. Thanksss
wrote...
#3
6 years ago
Great, make sure you mark the topic solved, it hides it from other eyes Slight Smile
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