Question

The beta of elsenore, inc., stock is 1.6, whereas the risk-free rate of return is 8 percent. if the expected return on the market is 15 percent, then what should investors expect as a return on elsenore

Answer 1

As per the CAPM, the investors of elsenore should expect a return of = rf + beta*(rm-rf)

The investors of elsenore should expect a return of = 8+1.6*(15-8) =19.2%