Beta coefficients and the capital asset pricing model PersonalFinance Problem Katherine Wilson is wondering how...

Beta coefficients and the capital asset pricing model Personal Finance Problem Katherine Wilson is wondering how much risk she must undertake to generate an acceptable return on her porfolio. The risk-free return currently is 2%.

The return on the overall stock market is 12%.

Use the CAPM to calculate how high the beta coefficient of Katherine's portfolio would have to be to achieve a portfolio return of 13%.

Solutions

Expert Solution

As per CAPM,

Required Return =Risk Free rate + (Market Return - Risk Free Rate ) * Beta

13% = 2% +(12%-2%)* Beta

(13% -2% ) /10% = Beta

Beta = 1.1

Answer = 1.1

jeff jeffy answered 2 years ago

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