A stock has an expected return of 14 percent, Its beta Is 0.8, and the risk-free...

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A stock has an expected return of 14 percent, Its beta Is 0.8, and the risk-free rate is 5.6 percent. What must the expected return on the market be? О 16.91% О 15.30% 16.74% О 10.50% О 16.10%

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Answer 1

Answer #1

Expected return on stock = risk free rate + beta ( expected return on market - risk free rate)

0.14 = 0.056 + 0.8(expected return on market - 0.056)

0.084 = 0.8(expected return on market - 0.056)

0.105 = expected return on market - 0.056

expected return on market = 0.1610 or 16.10%

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Answer 2

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