Question

Suppose the beta of Microsoft is 1.13, the risk-free rate is 3 percent, and the market risk premium is 8 percent. Use CAPM to calculate the expected return for Microsoft. Group of answer choices 12.04% 15.66% 13.94% 8.65%

Answer 1

Answer:the Expected return for Microsoft = 12.04%

Explanation:

According to Capital Asset Pricing Model CAPM, we have that  

Expected return= risk free rate+(betaXmarket risk premium)

= 3 + ( 8 x 1.13)

=3+9.04

 =12.04%

Therefore the Expected return for Microsoft = 12.04%