If the beta of Pepper Co. is -0.33, risk-free rate is 3% and the market risk premium is 7%, calculate the expected rate of return for Pepper stock:
0.69%
2.08%
1.61%
3.92%
According to the CAPM,
Expected Return = Risk-free Rate + [Beta x Market Risk Premium]
= 3% + [-0.33 x 7%] = 3% - 2.31% = 0.69%
Hence, Option 1st is correct.
If the beta of Pepper Co. is -0.33, risk-free rate is 3% and the market risk...
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