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Goryan [66]
3 years ago
9

Linke Motors has a beta of 1.30, the T-bill rate is 6.5%. The annual return on the stock market during the past 3 years was 15.0

0%, but investors expect the annual future stock market return to be 13.00%. Based on CAPM, what is the firm's required return
Business
1 answer:
Bess [88]3 years ago
5 0

Answer: 14.95%

Explanation:

The firm required return is;

= Risk free rate + beta * (Market return - RIsk free rate)

= 6.5% + 1.30 * ( 13% - 6.5%)

= 14.95%

<em>It is better to use the estimated future return. </em>

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