Assume the risk-free rate of return (rRF) is 5 percent, the market risk premium (RPM)...
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Accounting
Assume the risk-free rate of return (rRF) is 5 percent, the market risk premium (RPM) is 8 percent, and an investment exists that has a beta () equal to 1.5. According to the Capital Asset Pricing Model (CAPM), which of the following statements is correct?
The risk premium associated with the investment would be 12 percent
The appropriate rate of return for the investment is 9.5 percent.
All investments that have betas less than 1.0 must earn a total rate of return less than 8 percent.
None of the above is a correct statement
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