the capital asset pricing model has indicated that the required rate of return f

Question

the capital asset pricing model has indicated that the required rate of return for gamma corporation is 19 percent. your broker has recomended that you buy 10,000 shares of gamma's common stock because the expected return is 23 percent with a standard deviation of 18%.

a) determine the probability of earning a return greater than the required rate of return.
b) determine the probability of earning a negative return
c) indicate weather or not you believe that your broker's recomendation is a good one.

Explanation / Answer

determine the probability of earning a return greater than the required rate of return. (19-23)/18= -.222 (from normal distribution table) probability= .59

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