Over the past year you held a stock that generated a return of 15 percent. The...

Question

Question

Answer 1

Answer #1

Stock's beta= 1.5

Risk-free rate = 3%

Market risk premium = 7%

Expected return = [Risk-free rate + ( beta * Risk Premium)]

Expected return = 3% + [1.50 * 7%]

Expected return = 13.50%

Based on Capital asset Pricing Model, the return that should be expected to earn is 13.50%

Answer 2

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