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The common stock of Etisalat has an expected return of 11 percent. The return on the...


The common stock of Etisalat has an expected return of 11 percent. The return on the market is 3 percent and the risk-free rate of return is 19 percent. What is the beta of this stock? Answer in 2 decimal places


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Expert Solution

As per CAPM equation, expected return of the stock is given by:

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

Given: Expected return = 11, Risk free rate = 19, Market return = 3

Putting the given values in the above equation, we get,

11 = 19 + Beta * (3 - 19)

11 - 19 = Beta * (- 16)

-8 = Beta * (- 16)

Beta = -8 / -16

Beta = 0.5

jeff jeffy answered 2 years ago
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