|Author||Topic: CAPM pricing question|
|Hello, was wondering if someone could help me out. In volume 4 reading 51 practice problems - #8
I know the CAPM model to be this-
E(Ri)=RFr + B(Rm - RFr)
So, for the expected return for Stock A, I am getting E(Ra) = 4% + 0.9(8%-4%)
the answer key shows E(Ra)= 11.2%
I'm guessing the book isn't wrong, anyone with any suggestions what I am doing wrong??
|Where's the rest of the problem? We can't help you unless you give us the inputs and descriptors..|
|you should have 4+(0.9*8)
the 8% in the problem is Rm-Rf.
you have to pay a lot of attention to terminology, you can t afford loosing point with that.
CFA Discussion Topic: CAPM pricing question
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