CAPM Required Return a Company Has a Beta of 3

question 92

Multiple Choice

CAPM Required Return A company has a beta of 3.25. If the market return is expected to be 14 percent and the risk-free rate is 5.5 percent, what is the company's required return?

• A) 22.750%
• B) 33.125%
• C) 45.500%
• D) 51.000%

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Definitions:

External Economies

Benefits that arise from a firm's actions but are enjoyed by other parties or firms without compensation, typically leading to an under-provision of a good or service.

Production Costs

Expenses incurred in the process of creating a product or service, including materials, labor, and overhead.

Industry Size

The scale or magnitude of economic activity within a specific sector, measured by criteria such as number of firms, total employment, or total revenue.

Industry Supply Curve

A graphical representation showing the total quantity of a good that all producers in an industry are willing to supply at different prices.