ezto.mheducation.com Chapters 10/11 Homework Check Your Work Sup onnect FIN 317,

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ezto.mheducation.com Chapters 10/11 Homework Check Your Work Sup onnect FIN 317, Fall 2015: Section B (10:00 FINANCE oters 10/11 Homework Question 5 (of 6) value 1.00 points A stock has a beta of 1.21, the expected return on the market is 11.5 percent, and the risk-free rate is 4.7 percent Required: What must the expected return on this stock be? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g32.16)) Expected return Hints References eBook & Resources Hint #1

Explanation / Answer

Expected return on stock = Rf+ [Beta (Rm-Rf)]

                                              = 4.7 + [1.21 (11.5 - 4.7)]

                                              = 4.7 + [1.21 * 6.8]

                                              = 4.7 + 8.228

                                              = 12.93%

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