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Looking at market data, you find out that the current risk-free rate is 3.9%, the expected...

Looking at market data, you find out that the current risk-free rate is 3.9%, the expected return of the market index is 6.9%. Company XYZ's beta is 1.7. If the price of XYZ's stock is in equilibrium, what should be its required rate of return?

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Answer #1

required return=risk-free rate +Beta*(market rate- risk-free rate)

=3.9+1.7*(6.9-3.9)

=9%

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