e, payu semiannually. The bonds matu Jul alate Value of $1,000, and a yield-to-maturity of 8.5%. What is the price of t...

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e, payu semiannually. The bonds matu Jul alate Value of $1,000, and a yield-to-maturity of 8.5%. What is the price of the bon

business accounting

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Answer 1

Answer #1

Solution to QUESTION-12

Required rate of return for the stock

As per the Capital Asset Pricing Model (CAPM) approach, the Required rate of return for the stock is calculated by using the following formula

Required rate of return for the stock = Risk-free Rate + [Beta x Market risk premium]

= 5.00% + [2.0 x 7.00%]

= 5.00% + 14.00%

= 19.00%

“Hence, the Required rate of return for the stock will be 19.00%”

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Answer 2

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