AAFM GLO_CWM_LVL_1 Exam - Topic 8 Question 29 Discussion

Actual exam question for AAFM's GLO_CWM_LVL_1 exam

Question #: 29
Topic #: 8

The correlation coefficient between returns on stock of M/s X Ltd and the market returns is 0.3. The variance of returns on M/s X Ltd. is 225(%)2 and that for the market returns is 100(%)2 . The risk-free rate of return is 5% and the market return is 15%. The last paid dividend is Rs. 2 and the current purchase price is Rs. 30. The growth rate for the company is 10%. The required rate of return on the security as per the Capital Asset Pricing Model is:

A10%

B11.30%

C9.50%

D12.50%

Show Suggested Answer

Suggested Answer: C

by Goldie at May 05, 2022, 05:48 PM

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Fairy

4 months ago

Are we sure about these calculations? Feels off to me.

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Keneth

5 months ago

I'm leaning towards option D, 12.50% seems right.

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Erinn

5 months ago

Wait, how is the growth rate 10% with a market return of only 15%?

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Lavera

5 months ago

I think the required return is definitely higher than 10%.

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Corazon

5 months ago

The correlation coefficient is pretty low at 0.3.

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Reyes

5 months ago

I'm a bit confused by this question. I know Citrix has a lot of different tools, but I'm not sure which ones are used for optimizing Windows workloads. I'll have to guess on this one and hope I get it right.

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Cathrine

5 months ago

Okay, this looks like a CAPM problem. I'll start by calculating the beta using the correlation coefficient and standard deviations.

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