If you know the risk-free rate, the market risk-premium, and the beta of a stock, then...
If you know the risk-free rate, the market risk-premium, and the beta of a stock, then using the Capital Asset Pricing Model (CAPM) you will be able to calculate the expected rate of return for the stock.
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Homework Answers
True
We can calculate the expected rate of return of the stock using the risk-free rate, the market risk premium and the beta of the stock.
The formulae for calculation of Expected rate of Return in CAPM is:
Expected Rate of Return = Risk Free Rate + Beta * Market Risk Premium
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