Question

Monroe McIntyre has estimated the expected return for Bruehl Industries to be 11.45%. He notes the risk-free rate is 1.80% and the return of the market is 9.45%. Based on this information, he estimates Bruehl's beta to be:

Answer 1

As per CAPM,

Expected return=risk fee rate+(market return-risk free rate)*beta

or, 11.45=1.80+(9.45-1.80)*beta

or, 11.45-1.80=7.65 * beta

or, 9.65/7.65=beta

or, beta=1.2614