Required Rate of Return As an equity analyst you are concerned with what will happen to...

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Required Rate of Return As an equity analyst you are concerned with what will happen to...

Required Rate of Return

As an equity analyst you are concerned with what will happen to the required return to Universal Toddler Industries's stock as market conditions change. Suppose r_RF = 3%, r_M = 11%, and b_UTI = 1.9.

What is r_UTI, the required rate of return on UTI Stock? Round your answer to two decimal places.
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Answer 1

Answer #1

Required return=risk free rate+beta*(market rate-risk free rate)

=3+1.9*(11-3)

which is equal to

=18.2%

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Answer 2

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