Question

In: Finance

If the expected rate of return on AZNG is​ 12.72, its beta is1.09 and the...

If the expected rate of return on AZNG is 12.72, its beta is 1.09 and the market risk premium is 8%, what is the risk−free rate?

A. 5.42%

B. 4.72%

C. 8.72%

D. 4.0%

Solutions

Expert Solution

As Per CAPM,

where, rf = Risk free return

Rmp = Market Risk Premium= 8%

Beta = 1.09

Required rate of return or Expected Return = 12.72%

12.72% = Rf + 1.09(8%)

12.72% = Rf + 8.72%

Rf = 4%

So, the risk−free rate is 4%

Option D

jeff jeffy answered 2 years ago
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