Question 1
5 pts
Centex Energy has a beta of 1.13. Assume that risk-free rate and the expected rate of return on the
market are 2% and 12% respectively. According to the capital asset pricing model (CAPM), what is
the expected rate of return for this company's stock?
Your answer should be between 11.45 and 18.55, rounded to 2 decimal places, with no special
characters.
Question 2
5 pts
Penguin International's stock has an expected return of 14.2%, a beta of 1.25. If the risk-free rate is
2%, what is the market risk premium according to the CAPM?
Your answer should be between 7.74 and 10.58, rounded to 2 decimal places, with no special
characters.