CMFAS M8 Question
- Thread starter CrowsZero
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smilingbuddha
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Given
alpha = 3%
rf = 3%
Rm - rf = 5%
Rp = 15%
Derived
Since alpha = 3%; CAPM Ri = 12%
Cuz: Rp - CAPM = Jensen alpha
Now that you have: Ri, rf, Rm-rf, find beta.
Cuz: Ri = rf + b(Rm - rf)
12 = 3 + b(5)
b = 9/5
alpha = 3%
rf = 3%
Rm - rf = 5%
Rp = 15%
Derived
Since alpha = 3%; CAPM Ri = 12%
Cuz: Rp - CAPM = Jensen alpha
Now that you have: Ri, rf, Rm-rf, find beta.
Cuz: Ri = rf + b(Rm - rf)
12 = 3 + b(5)
b = 9/5
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