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lozanna [386]
3 years ago
5

The risk-free rate is 2.2 percent and the market expected return is 11.9 percent. What is the expected return of a stock that ha

s a beta of .86?
Business
1 answer:
zepelin [54]3 years ago
5 0

Answer:

the expected return of a stock is 10.542%

Explanation:

The computation of the expected return on a stock is shown below:

Expected return on stock is

= Risk free rate + beta × (market rate of return - risk free rate)

= 2.2% + 0.86 × (11.9% - 2.2%)

= 2.2% + 0.86 × 9.7%

= 2.2% + 8.342

= 10.542%

hence, the expected return of a stock is 10.542%

We simply applied the above formula so that the correct value could come

And, the same is to be considered

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