Question

The common stock of Jensen Shipping has an expected return of 12.08 percent. The return on the market is 9 percent and the risk-free rate of return is 3.5. What is the beta of this stock?

2.56

0.55

1.23

1.56

0.86

Answer 1

Ans 1.56

Expected Return =	Risk free Return + (Market Return - Risk free return)* Beta
12.08% =	3.5% + (9% - 3.5%) * Beta
12.08% - 3.5% =	5.5% * Beta
8.58% =	5.5% * Beta
Beta =	8.58% / 5.5%
Beta =	1.56