A stock has a beta of 1.3 and an expected return of 15.0 percent. If the risk-fr
ID: 2726827 • Letter: A
Question
A stock has a beta of 1.3 and an expected return of 15.0 percent. If the risk-free rate is 2.8 percent, what is the market risk premium? (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 a beta of 1.3 and an expected return of 15.0 percent. If the risk-free rate is 2.8 percent, what is the market risk premium? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)
Explanation / Answer
Solution.
Calculation of market risk premium.
Market risk premium = Expected return - Risk-free rate.
= 15% - 2.8% = 12.20%
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