2. A stock has a beta of 1.35, the market risk premium is 6 percent, and...

2. A stock has a beta of 1.35, the market risk premium is 6 percent, and the risk-free rate is 3.5 percent. What is the required rate of return on this stock?

Group of answer choices

a. 3.50%

b. 6.87%

c. 11.60%

d. 13.13%

Expert Solution

Required rate of return = Risk-free rate + Beta(Market risk premium)

Required rate of return = 0.035 + 1.35(0.06)

Required rate of return = 0.1160 or 11.60%

jeff jeffy answered 2 years ago

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