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i Chrome File Edit View History Bookmarks People Window Help 99% " Tue 11:31 AM Final CSecure https://ccle.ucla.edu/mod/quiz/attempt.php?attempt 2027943&page; 14 Homework 3 Homework 4 Sample Final x "( Net Present Value Calculator x UCLA CCLE IShared System Need Help CHAN, CHING Y My sites 18W-MGMT130A-2 Final/ Final Control Panel Question 15 Not yet Quiz navigation Suppose a particular stock has a beta of 1.30. The risk-free rate of return is 7.5% and the expected rate of return on the market is 15.8% Vhat is the expected rate of return on this stock according to the CAPM? 8 9 10 11 12 13 14oots outo 15 16 17 18 19 20 21r sin Select one: a 37.79% 22 23 b. 28.04% Finish attempt... Oc. 18.29% d. 10.79% c. 8.30% Previous page Next page © 2018 UC Regents ttps://ccie.ucia.edu/modjquiz/attempt.php?attempt-2027943&page-15;# Contact About Privacy Copyright UCLA linksI UCLA Registrar MyUCLA Disability Couns/PsychSvc (CAPS)

Explanation / Answer

Ans = c. 18.29%:

As per CAPM, Expected Rate of Return = Rf+ Beta*(Rm-Rf), where:

Rf = Risk free rate of Return

Rm = Market Rate of Return

Expected Return = 7.5+(1.3*(15.8-7.5)) = 18.29%

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