Let’s say that the current 10-year Treasury bond yields 4.0% and the expected market return of a broadly diversified basket of equities is 10.0%. What is the required rate of return for a company that has a beta of 1.95?
Required return=risk free rate+beta*(market rate-risk free rate)
=4+1.95*(10-4)
which is equal to
=15.7%
Let’s say that the current 10-year Treasury bond yields 4.0% and the expected market return of a broadly diversified bas...
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