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Find the risk-free rate given that the expected rate of return on asset j is 14 percent the expected return on the market portfolio is 12 percent and the beta b for asset j is 1.5?
Wiki User
∙ 14y ago
CAPM equation
E(Rj) = rf + b[E(Rm) - rf]
0.14 = rf + 1.5(0.12-rf)
0.14 = rf + 0.18 - 1.5rf
-0.04 = rf - 1.5rf
-0.04 = (1-1.5)rf
-0.04 = -0.5rf
rf = 0.08
rf = 8%
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∙ 14y ago
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