A stock with a beta of 0.8 has an expected rate of return of 12%. If...

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A stock with a beta of 0.8 has an expected rate of return of 12%. If...

A stock with a beta of 0.8 has an expected rate of return of 12%. If the market return this year turns out to be 5 percentage points below expectations, what is your best guess as to the rate of return on the stock?

Stock return %

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Answer 1

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Answer #1

STOCK RETURN WILL BE REDUCED BY 0.8 *(5%) =>4%

=> NEW return on stock will be = 12% - 4%

=>8%.

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Answer 2

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