The common stock of GE has an expected return of 12.4 percent.
The common stock of GE has an expected return of 12.4 percent. The market return is 9.2 percent and the risk-free return is 3.87 percent. What is the stock's beta?
A. 0.42 B. 1.00 C. 1.32 D. 1.42 E. 1.60
Homework Answers
As per CAPM,
Expected return = Risk free rate + ( Market return - risk free rate )* Beta
12.40 = 3.87 + ( 9.20 - 3.87) * Beta
Beta = (12.40 - 3.87) / 5.33
= 1.60
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