CFA CFA General Capital Asset Pricing Model

Capital Asset Pricing Model

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  • This topic has 1 reply, 2 voices, and was last updated 3w by metwoboy.
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      You are given the following information about corporate stock P and the market:

      • Risk-free rate is 7.
      • The expected return and volatility for corporate stock P is 7 and 33 respectively.
      • The Expected Return and Volatility for Market is 6 and 12 respectively.
      • The correlation between the returns of corporate stock P and the market is 18.
      • Assume the Capital Asset Pricing Model holds.

      Calculate the required return for corporate stock P?

      Could somebody solve this question?

      Thanks.

      Zee Tan voted up
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      well. I found this on another post. Hope this is helpful for you.

       

      E(Ri) = Rf + βi (E(Rm) – Rf)

      where E(Ri) is the expected return on capital asset and E(Rm) is the market risk premium.

      Zee Tan voted up
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