Bandwagon stock has a beta of 1.21. The risk-free rate of return is 3.14 percent and...
Bandwagon stock has a beta of 1.21. The risk-free rate of return is 3.14 percent and the market risk premium is 7.92 percent. What is the expected rate of return on this stock?
Multiple Choice
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13.05 percent
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12.39 percent
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14.13 percent
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12.72 percent
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14.63 percent
Homework Answers
Expected rate of return = Risk-free rate + Beta(Market risk premium)
Expected rate of return = 0.0314 + 1.21(0.0792)
Expected rate of return = 0.1272 or 12.72 percent
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