Pearson MyLab & Mastering - 19 F Basic Financial Fin 301-01 (Fall 2019) Homework: Chapter 6...

Question

Question

business finance

Answer 1

Answer #1

a. Using the CAPM, the fair rate of return for Intel common stock is:

= Risk free rate + Beta(Expected market return - Risk free rate)

= 8% + 1.2(12% - 8%)

= 12.80%

b. The computed 12.80% is a fair rate because it compensates the investor for the time value of money and for assuming risk.

Answer 2

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