what would be the required returnon stock XYZ?

Question

648 viewsOctober 27, 2016

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Darshita 6.14K September 12, 2016 0 Comments

You are given the following returns for the Market and for XYZ in years 1998 (thebest year for the market) and 2001 (the worst year). (a) What is your estimate of thebeta of stock XYZ? And (b) Assuming a risk free rate of 6 percent and an expectedreturn on the Market of 12% in the coming year, what would be the required returnon stock XYZ?

1 Answer

score 0 · Answer 1 · 2016-09-12T05:07:54+00:00

The beta of stock XYZ =1.5

Working notes for the above answer is as under

R rf = 6%

Rm = 12%

r = 6 + (12-6) 1.5

=15%

The beta of stock XYZ

= ( 67.5 +22.5) -/ ( 45 + 12)

= 1.5

The beta of stock XYZ =1.5

1 Answer

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