Sante Capital operates two mutual funds headquartered in Houston, Texas. The firm is evaluating the...
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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
2.5
percent, and the expected return for the market portfolio is
10
percent. What should be the expected rates of return for each investment?
Security
Beta
A
1.46
B
0.72
C
1.14
D
0.98
a. The expected rate of return for security A, which has a beta of
1.46,
is
%.
(Round to two decimal places.)
b. The expected rate of return for security B, which has a beta of
0.72,
is
%.
(Round to two decimal places.)
c. The expected rate of return for security C, which has a beta of
1.14
, is
%.
(Round to two decimal places.)
d. The expected rate of return for security D, which has a beta of
0.98
, is
%.
(Round to two decimal places.)
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