A stock has an expected return of 11.2 percent, its beta is .90, and the risk-fr

Question

A stock has an expected return of 11.2 percent, its beta is .90, and the risk-free rate is 3.6 percent. What must the expected return on the market be? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

A stock has an expected return of 11.2 percent, its beta is .90, and the risk-free rate is 3.6 percent. What must the expected return on the market be? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

Explanation / Answer

Given that,          

Expected return = 11.20%      
Beta = 0.90   
Risk free rate of return = 3.6%      

Expected return on market   = (Expected Return-Risk Free rate of return) / Beta

= ( 11.2 - 3.6 ) / 0.9

= 8.44 %

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.