5. 14. Using CAPM. A stock has an expected return of 11.4 percent, the risk-free rate...

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5. 14. Using CAPM. A stock has an expected return of 11.4 percent, the risk-free rate is 3.7 percent, and the market risk pre

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Answer 1

Answer #1

Calculation of the beta stock is given below : Expected return = Risk-free rate +Beta x Market risk premium 0.114=0.037 +Beta x0.068 0.114 -0.037 =Beta x0.068 0.077 = Beta

Beta is 1.13 (rounded to 2 decimal point)

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