What would be the fair return for each company, according to the capital asset pricing model (CAPM)?
Here are data on two companies. The T-bill rate is 4%
Subject: Business / Finance
Question
3) Here are data on two companies. The T-bill rate is 4% and the market risk premium is 6%.
Company $1Discount store Everything $5
Forecasted return 12.0% 11%
Standard deviation of return 8.0% 10%
Beta 1.5 1
What would be the fair return for each company, according to the capital asset pricing model (CAPM)?