Using the CAPM to find expected returns) Sante Capital
operates two mutual funds headquartered in Houston, Texas.
The firm is evaluating the stock of four different firms for
possible inclusion in its fund holdings. As part of
their analysis, Sante's managers have asked their junior
analyst to estimate the investor-required rate of return on
each firm's shares using the CAPM and the
following estimates: The rate of interest on short-term
U.S. Treasury securities is currently
2
percent, and the expected return for the market portfolio
is
11
percent. What should be the expected rates of return for
each investment?
Security
Beta
A
1.47
B
0.83
C
1.13
D
0.95
Using the CAPM to find expected returns) Sante Capital operates two mutual funds headquartered in Houston, Texas. The
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