According to the Capital Asset Pricing Model (CAPM), if the risk-free rate is 3% and the market risk premium is 6%, a stock with a beta of 1.2 has an expected return of 10.2% (3% + 1.2 × 6%), while a stock with a beta of 0.8 has an expected return of 7.8% (3% + 0.8 × 6%).

Authors

• Person: Not available Organization: Pressbooks
  Chapter 8 – Risk and Return – Fundamentals of Finance

Sources

• Chapter 8 – Risk and Return – Fundamentals of Finance pressbooks.pub Pressbooks via serper

Referenced by nodes (2)

• risk-free rate concept
• expected return concept