Question

Mulherin's stock has a beta of 1.23, its required return is 11.75%, and its risk-free rate is 2.30%. What is the required rate of return on the market?

Answer 1

Required return $=$ Risk-free rate $+$ Beta*(MArket rate- risk-free rate )

$11.75=2.3+1.23*(Market rate-2.3)$

$(11.75-2.3)/1.23=Market rate-2.3$

$Market rate=(11.75-2.3)/1.23+2.3$

Hence the required rate of return on the market would be $9.98$%(Approx).

What is Return in the Share market? How do stocks produce returns?

A return is the increase in value of a project, investment, or item over time. This increase in value can be expressed as a price increase or a percentage increase. A gain is shown by a positive return, whilst a loss is indicated by a negative return.

As a simple illustration, a company with a $5$% dividend yield in relation to its purchase price and a $5$% value growth over the first year of ownership would have generated a $10$% total return over the course of a year. Both a dollar amount and a percentage can be used to determine total returns.

To learn more about Market Share visit:

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