A stock has a beta of 1.26, the expected return on the market is 9 percent, and the risk-free rate is 4 percent. What must the expected return on this stock be?

688 views
0

A stock has a beta of 1.26, the expected return on the market is 9 percent, and the risk-free rate is 4 percent. What must the expected return on this stock be?

Darshita Changed status to publish July 26, 2020
0

Answer: E(Ri) = 10.30%
Explaination
E(Ri)
= Rf + [E(RM) − Rf] × βi
= .040 + (.09 − .040)(1.26)
= .1030
= 10.30%
E(Ri) = 10.30%

Darshita Changed status to publish July 26, 2020

Contact us today

Ask for our academic services

Copyright SmartStudyHelp 2016. All Rights Reserved