Based on the following information, calculate the required return based on the CAPM:
Risk Free Rate = 3.5%
Market Return =10%
Beta = 1.08
r= 3.5+1.08(10-3.5)
To calculate the required return using the Capital Asset Pricing Model (CAPM), you can use the following formula:
Required Return = Risk-Free Rate + Beta * (Market Return - Risk-Free Rate)
Given the following information:
Risk-Free Rate = 3.5%
Market Return = 10%
Beta = 1.08
Substituting these values into the formula:
Required Return = 3.5% + 1.08 * (10% - 3.5%)
Required Return = 3.5% + 1.08 * 6.5%
Required Return = 3.5% + 7.02%
Calculating the sum:
Required Return = 3.5% + 7.02%
Required Return = 10.52%
Therefore, the required return based on the CAPM for this particular investment is 10.52%.