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Delvig [45]
3 years ago
8

A stock has an expected return of 15.1 percent, the risk-free rate is 5.95 percent, and the market risk premium is 7.8 percent.

Required: What must the beta of this stock be
Business
1 answer:
horsena [70]3 years ago
6 0

Answer:

1.17%

Explanation:

Expected return is 15.1 %

Risk free rate is 5.95 %

Market risk premium is 7.8%

Therefore the beta can be calculated as follows

Expected return= risk free rate + (beta×market risk premium)

15.1%= 5.95% + (beta × 7.8%)

15.1%-5.95%= 7.8% beta

9.15%= 7.8% beta

beta= 9.15%/7.8%

beta= 1.17%

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