Assume that the risk-free rate is 3% and the expected return on the market is 8.5%....

Assume that the risk-free rate is 3% and the expected return on the market is 8.5%. What is the required rate of return on a stock with a beta of 1.3?

	a.	10.15%
	b.	14.05%
	c.	11.05%
	d.	7.15%

Expert Solution

Using CAPM, Required rate of return = Risk free rate + Beta * Market risk premium

Required rate of return = 3% + 1.3* ( 8.5% - 3%) = 3% + 5.5% * 1.3 = 10.15%

Answer is

a.	10.15%

jeff jeffy answered 3 years ago

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Assume that the risk-free rate is 3% and the expected return on the market is 8.5%....

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