AAFM Exam GLO_CWM_LVL_1 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: