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Elina [12.6K]
3 years ago
7

The stock of Big Joe's has a beta of 1.40 and an expected return of 12.10 percent. The risk-free rate of return is 4.6 percent.

What is the expected return on the market?
Business
1 answer:
leonid [27]3 years ago
7 0

Answer:

5.403%

Explanation:

Calculation for the expected return on the market

Using this formula

Expected return =(Expected return-Risk-free rate of return)/Stock beta +Risk-free rate of return

Where,

Expected return=12.10%

Risk-free rate of return=4.6%

Stock beta =1.40%

Let plug in the formula

Expected return =(0.121-0.046)/0.014+0.046

Expected return =0.075/0.014+0.046

Expected return=5.357+0.046

Expected return =5.403%

Therefore the expected return on the market will be =5.403

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