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
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
