Assume that the risk-free rate is 4.8 percent, and that the market risk premium is 4.1...

Assume that the risk-free rate is 4.8 percent, and that the market risk premium is 4.1 percent. If a stock has a required rate of return of 13.5 percent, what is its beta?

Expert Solution

As per CAPM,

Required Rate of Return = Risk free Rate + (Beta * Market Risk Premium)

13.5% = 4.8% + (Beta * 4.1%)

13.5 % - 4.8% = (Beta * 4.1%)

8.7% = (Beta * 4.1%)

8.7% / 4.1% = Beta

Beta = 2.12

jeff jeffy answered 2 years ago

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