Question

A stock has a beta of 1.16, the expected return on the market is 12 percent, and the risk-free rate is 3.5 percent. What must the expected return on this stock be? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Answer 1

Answer:

13.36%

Explanation:

R = Rf + B(Rm - Rf)

where,

Rf= risk free return

B= beta

Rm= Market rate of return

Rm-Rf= Risk premium