The Risk-Free Rate and the Expected Market Rate of Return

question 18

Multiple Choice

The risk-free rate and the expected market rate of return are 0.056 and 0.125, respectively. According to the capital asset pricing model (CAPM) , the expected rate of return on a security with a beta of 1.25 is equal to

• A) 0.142.
• B) 0.144.
• C) 0.153.
• D) 0.134.
• E) 0.117.