A stock has a beta of 1.22the expected return on the market is 12 percent, and...

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Question

A stock has a beta of 1.22the expected return on the market is 12 percent, and the risk- free rate is 4.65 percent. What must

Answer 1

Answer #1

Based on CAPM, Expected return on stock = Risk free rate + Beta * (Expected market return - Risk free rate)

Expected return on stock = 4.65% + 1.22 * (12% - 4.65%)

Expected return on stock = 4.65% + 8.967%

Expected return on stock =13.62%

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Answer 2

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