Risk and Capital

Risk & Capital

Risk-Free Rate of Interest

According to the Bloomberg.com, the “U.S. 10-year Treasury” rate of return is 1.625% while the value for the market risk premium is 9%.

XYZ Stock information

The following information is extracted from the XYZ company data available at site.

Beta of XYZ (B): 1.64

Current Annual Dividend XYZ: $0.8

3 year dividend growth rate of XYZ: 8.2%

P/E of Industry: 23.2

EPS of XYZ: $4.87

Using CAPM - Ks Required Rate of Return

To calculate Ks Required Rate of Return through CAPM model, the following formula will be used:

Ks = KRF + (KRF - KRM)* (

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