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timofeeve [1]
3 years ago
8

A stock has an average expected return of 9.7 percent for the next year. The beta of the stock is 1.34. The T-Bill rate is 5.2%

and the T-Bond rate is 3%. What is the market risk premium
Business
1 answer:
givi [52]3 years ago
4 0

Answer:

3.4%

Explanation:

According to the capital asset price model: Expected rate of return = risk free + beta x (market rate of return - risk free rate of return)

9.7 = 5.2 + 1.34(x - 5.2)

9.7 - 5.2 =  1.34(x - 5.2)

3.35 = x - 5.2

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