Question

A stock has a beta of 1.34, the expected return on the market is 9 percent, and the risk-free rate is 3 percent. What must the expected return on this stock be

Answer 1

Based on the stock's beta, the return on the market, and the risk-free rate, the expected return is 11.04%.

What is the expected return?

This can be found using the Capital Asset Pricing Model (CAPM).

Expected return = Risk free rate + Beta x ( Market return - Risk free rate).

Solving gives:

= 3% + 1.34 x (9% - 3%)

= 11.04%

Find out more on the Capital Asset Pricing Model at brainly.com/question/14727369.