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AAFM GLO_CWM_LVL_1 Exam - Topic 8 Question 29 Discussion

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:
C) 9.50%
A) 10%
B) 11.30%
D) 12.50%

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
[All GLO_CWM_LVL_1 Questions]

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:

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Suggested Answer: C

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

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Fairy
9 months ago
Are we sure about these calculations? Feels off to me.
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Keneth
9 months ago
I'm leaning towards option D, 12.50% seems right.
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Erinn
9 months ago
Wait, how is the growth rate 10% with a market return of only 15%?
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Lavera
9 months ago
I think the required return is definitely higher than 10%.
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Corazon
10 months ago
The correlation coefficient is pretty low at 0.3.
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Reyes
10 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
10 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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