A stock has a beta of 1.5 and an expected return of 13.3 percent. If the risk-fr
ID: 2737477 • Letter: A
Question
A stock has a beta of 1.5 and an expected return of 13.3 percent. If the risk-free rate is 1.7 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 1.5 and an expected return of 13.3 percent. If the risk-free rate is 1.7 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
Required return (CAPM) = Rf+×Rp
Rf is risk free return
is beta of the security
Rp is risk premium
13.30% = 1.70%+1.50×Rp
Risk premium, rp = 7.73%
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