Description
Calculate the capital asset pricing model’s required return (k) and Jensen’s measure of excess return, alpha, for the following investment projects, then rank-order them from best to worst. Assume that the risk-free return, if, is 6% and the market return, im = 12%.
Project Beta Expected Return
Project |
Beta | Expected Return |
A |
1.0 | 14% |
B | 1.2 |
20% |
C | 1.6 |
30% |
D | 0.8 |
10% |
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