CAPM

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In Problems 21 and 23 below, assume the risk-free rate is 8% and the expected rate of return on the
market is 18%. Use the SML of the simple (one-factor) CAPM to answer these questions.

  1. A share of stock is now selling for $100. It will pay a dividend of $9 per share at the end of the year.
    Its beta is 1. What must investor expect the stock to sell for at the end of the year?
  2. A stock h
    as an expected return of 6%. What is its beta?