A stock has a beta of 1.07, the expected return on the market is 0.11, and...

A stock has a beta of 1.07, the expected return on the market is 0.11, and the risk-free rate is 0.05. What must the expected return on this stock be? Enter the answer with 4 decimals (e.g. 0.1234).

Expert Solution

Expected return = Risk-free rate + Beta(Market return - Risk-free rate)

Expected return = 0.05 + 1.07(0.11 - 0.05)

Expected return = 0.1142

jeff jeffy answered 2 years ago

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