A stock has a beta of 1.20, the market premium is 13.0%, and the risk-free rate is 1.0%. What must the expected return o...

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Question

A stock has a beta of 1.20, the market premium is 13.0%, and the risk-free rate is 1.0%. What must the expected return on this stock be?

ENTER YOUR ANSWER AS A PERCENTAGE WITH ONE DECIMAL PLACE (e.g., 12.1) AND NOT AS A DECIMAL (e.g., 0.121). ROUND TO THE NEAREST TENTH OF A PERCENT.

Answer 1

Answer #1

Expected rate=risk free rate+Beta*market risk premium

=1+(1.2*13)

which is equal to

=16.6%

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Answer 2

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