medium · Quantitative Finance
The risk-free rate is 3% and the expected return of the market portfolio is 9%. A particular stock has a covariance with the market of 0.030, while the variance of the market return is 0.025.
According to the Capital Asset Pricing Model (CAPM), what is the required rate of return for this stock?
- 10.2%
- 7.2%
- 13.8%
- 9.0%
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