LS0893: Beta of Pragati Ltd is 1.55. The market rate of return is 15%. The risk free rate of return is 8 %

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Question: Beta of Pragati Ltd is 1.55. The market rate of return is 15%. The risk free rate of return is 8 %

a. Compute the expected return based on CAPM,
explaining all the components of the CAPM Model

b. Suppose, the risk premium on the market goes up by 3.5 % points do you think that the expected return on the stock of the above company will change? Calculate and elaborate.


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