Beta and Required Return:
The riskless return is currently 6%, and Chicago Gear has estimated the contingent returns given here.
Realized Return
State of the Market Probability that State Occurs Stock Market Chicago Gear
Stagnant 0.20 -10% -15%
Slow Growth 0.35 10% 15%
Average Growth 0.30 15% 25%
Rapid Growth 0.15 25% 35%
Calculate the expected returns on the stock market and on Chicago Gear stock.
- Stock Market
- Chicago Gear
What is Chicago Gear's beta?
What is Chicago Gear's required return according to the CAPM?