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Corporate Finance · End Term · 21 Dec 2025 · September 2025 term

Question 29: KLM Inc. has an expected return of 12% and a beta of 1.6…

Question 29

+4 marksOne or more correct options

KLM Inc. has an expected return of 12% and a beta of 1.6. The risk-free rate is 6% and the expected return on market portfolio is 10%. Select the correct statements according to CAPM

Select all that apply.

  1. A

    The required expected return for KLM Inc. should be 12.4%.

  2. B

    KLM Inc. stock is overpriced.

  3. C

    KLM Inc. has a positive Alpha of 0.4%.

  4. D

    An investor following the CAPM recommendation should sell KLM Inc. shares.

Show answer

Correct answers

  • A

    The required expected return for KLM Inc. should be 12.4%.

  • B

    KLM Inc. stock is overpriced.

  • D

    An investor following the CAPM recommendation should sell KLM Inc. shares.

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Question 29 of 30 in the IIT Madras BS Corporate Finance (Corporate Finance) End Term paper sat on 21 Dec 2025, in the September 2025 term (Corporate Finance 18 Dec 25). It carries 4 marks.

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