If the risk free rate of return is 7%, the required return on the market is...

If the risk free rate of return is 7%, the required return on the market is 10%, and the required rate of return on Stock J is 13%, what is Stock J’s beta coefficient?

a. 1.0

b. 1.5

c. 2.0

d. 2.5

e. 3.0

Expert Solution

Ans c. 2.0

Required Return =	Risk free Return + (Market Return - Risk free return)* Beta
13% =	7% + (10% - 7%) * Beta
13% - 7% =	3% * Beta
Beta =	6% / 3%
Beta =	2.0

jeff jeffy answered 2 years ago

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