General pharmacy's stock has a beta of 1.8 and an expected return of 14%, and sicoras corp.'s stock has a beta of 1.5 and an expected return of 16.2%. assuming capital-asset pricing model holds, calculate the return on the market portfolio. octonaut
In
order to calculate the return on market portfolio of the stock, you need to use
this formula:
Risk
= risk free rate + beta of the stock (expected market return)
Substituting
the values to the formula:
General
pharmacy – 25.20% (1.8 x 14%)
Sicoras
Corp. – 24.30% (1.5 x 16.2%)
