An analyst finds that the beta coefficient of the security-DTX is 1.86 and the expected rate...

An analyst finds that the beta coefficient of the security-DTX is 1.86 and the expected rate of return from this security is 17.71% as per CAPM. If the government bond is yielding 4.71%, find the market risk premium.

[Round the final answer to two decimal places. If your answer is 12.34%, write only 12.34]

Solutions

Expert Solution

Expected return as per CAPM = Risk free rate + beta*Market risk premium

17.71% = 4.71% + 1.86*Market risk premium

Market risk premium = 6.9892%

i.e. 6.99%

i.e. 6.99

jeff jeffy answered 2 years ago

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