Portfolio Management Q119

0. If the expected return on the market portfolio is 8% and the risk free rate is 4%, the expected return of a security with a beta of 1.25 is closest to:

  • Option : B
  • Explanation : CAPM : re=Rf+β[E (Rmkt) −Rf] = 4 + 1.25(8 - 4) = 9%.
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