flawless21
Member
I am having trouble understanding Slide 34 in Chapter 13 (Elton).
The question is: What is the expected return on an asset with a Beta of 2.0?
I understand you use the CAPM formula but I do not understand how you get the answer.
12% = Rf + 1.5(Rm-Rf) - I understand
6% = Rf + .5(Rm-Rf) - I understand
I do not understand that from here, you get to 6%=(Rm-Rf) -> rF = 3%
So to get 6, you do 12-6, but how does that get you to the rF rate?
The question is: What is the expected return on an asset with a Beta of 2.0?
I understand you use the CAPM formula but I do not understand how you get the answer.
12% = Rf + 1.5(Rm-Rf) - I understand
6% = Rf + .5(Rm-Rf) - I understand
I do not understand that from here, you get to 6%=(Rm-Rf) -> rF = 3%
So to get 6, you do 12-6, but how does that get you to the rF rate?