Stock J has a beta of 1.47 and an expected return of 15.8 percent. Stock K has a

Question

Stock J has a beta of 1.47 and an expected return of 15.8 percent. Stock K has a beta of 1.05 and an expected return of 11.9 percent. What is the risk-free rate if these securities both plot on the security market line?
2.15 percent
3.34 percent
3.88 percent
4.41 percent
4.68 percent Stock J has a beta of 1.47 and an expected return of 15.8 percent. Stock K has a beta of 1.05 and an expected return of 11.9 percent. What is the risk-free rate if these securities both plot on the security market line? 2.15 percent 3.34 percent 3.88 percent 4.41 percent 4.68 percent
2.15 percent
3.34 percent
3.88 percent
4.41 percent
4.68 percent

Explanation / Answer

15.8% = rf+ 1.47*rm

11.9% = rf+1.05*rm

Solving these two equations

rf= 2.15%

2.15 percent

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