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timama [110]
3 years ago
14

Investors expect the market rate of return this year to be 10%. The expected rate of return on a stock with a beta of 1.2 is cur

rently 12%. If the market return this year turns out to be 8%, how would you revise your expectation of the rate of return on the stock
Business
1 answer:
Artemon [7]3 years ago
3 0

Answer: 9.6%

Explanation:

Expected rate of return on the stock will change by beta times the unanticipated

change in the market return:

1.2 ( .08 - .10) = -2.4%

• Therefore, the expected rate of return on the stock should be revised to:

.12 - .024 = 9.6%

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