CAPM and Required Return
Calculate the required rate of return for XYZ, Inc. using the following information:
The investors expect a 3.0% rate of inflation, the real risk-free rate is 2.0%, the market risk premium is 6.0%. XYZ Inc. has a beta of 1.7. Over the past 5 years, the realized rate of return has average 13.0%.
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nominal Rf w/inflation
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5.06%
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=(1+.02)*(1+.03)-1
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required rate of return
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5.16%
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=.0506+(.0170*.06)
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Is this correct?