Question
In: Finance
If the market risk premium is 2%, the risk-free rate is 4.4% and the beta of...
If the market risk premium is 2%, the risk-free rate is 4.4% and the beta of a stock is 1.2, what is the expected return of the stock?
Solutions
Expert Solution
Solution :-
Risk free rate ( Rf) = 4.4%
Beta of stock = 1.2
Market risk premium = 2%
Expected rate of return according to capital asset pricing model is :-
= Risk free rate + Beta ( market risk premium )
= 4.4% + 1.2 ( 2% )
= 4.4% + 2.4%
= 6.8%
Expected rate of return is 6.8%
jeff jeffy answered 2 years agoRelated Solutions
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