A stock has an expected return of 10.6 percent, its beta is 0.99, and the risk-free rate is 6.2 percent. |
Required: |
What must the expected return on the market be? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) |
Expected return | % |
expected return=risk-free rate +Beta*(market rate- risk-free rate )
10.6=6.2+0.99*(Market rate-6.2)
(10.6-6.2)/0.99=Market rate-6.2
Market rate=(10.6-6.2)/0.99+6.2
=10.64%(Approx).
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