A stock has an expected return of 15.8 percent, the risk-free rate is 3.6 percent, and...

Question

Question

A stock has an expected return of 15.8 percent, the risk-free rate is 3.6 percent, and the market risk premium is 9.9 percent

Answer 1

Answer #1

Expected Ret = Rf + Beta [ Risk Premium ]

15.8% = 3.6% + Beta [ 9.9% ]

Beta [ 9.9% ] = 15.8% - 3.6%

= 12.2%

Beta = 12.2% / 9.9%

= 1.23

Beta of stock is 1.23

Answer 2

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