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Elena L [17]
4 years ago
10

Your estimate of the market risk premium is 9​%. The​ risk-free rate of return is 3.7​% and General Motors has a beta of 1.7. Ac

cording to the Capital Asset Pricing Model​ (CAPM), what is its expected​ return?
Business
1 answer:
densk [106]4 years ago
7 0

Answer:

19%

Explanation:

The market risk premium is 9%

The risk free rate of return is 3.7%

General motors have a beta of 1.7

Therefore, using the capital asset pticing model the expected return can be calculated as follows

= 3.7% + 1.7×9%

= 3.7% + 15.3%

= 19%

Hence the expected return is 19%

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If a firm has the market price of the firm's common stock of $500 and its annual earnings per share of $50 , then the firm has a
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