An analyst is studying the movement of the stock Shrek. His research and came up with a different rates of return for Shrek, 25% for strong and 10% for weak economic scenarios. Based on the latest economic outlook, the probability of having a strong, normal, and weak economy, are 30%, 50%, and 20%, respectively. The total expected return of Shrek stock is 17% considering the various probabilities. Determine the rate of return of Shrek if the economy turns normal. Sample format: XX.XX%
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
An analyst is studying the movement of the stock Shrek. His research and came up with a different
Sample format: XX.XX%
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