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What is the CAPM required return of a stock with a beta of 1.2 if the...

What is the CAPM required return of a stock with a beta of 1.2 if the risk-free rate is 1.9% and the expected market risk premium is 5.5%? Answer in percent, rounded to two decimal places. (e.g., 4.32% = 4.32). ​[Hint: CAPM required return = Risk-free rate + beta x EMRP. Remember order of operations. Multiply beta and EMRP first, then add the risk-free rate]

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Answer #1

CAPM required return = Risk free rate + ( Expected Market risk premium * beta)

= 1.9 % + ( 5.5% * 1.2)

= 8.50%

Hence the correct answer is 8.50%

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