Consider the CAPM. The risk-free rate is 3% and the expected return on the market is...

Consider the CAPM. The risk-free rate is 3% and the expected return on the market is 17%. The expected return on a stock with a beta of 1.2 is %.

Please enter your answer with TWO decimal points.

Solutions

Expert Solution

According to CAP.M

Expected return = Risk Free return + beta × ( Market return - risk free return)

= 3% + 1.2 ×(17%-3%)

= 3% + 1.2(14%)

= 3% + 16.8%

= 19.8%

Expected return = 19.8%

jeff jeffy answered 1 year ago

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