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Lunna [17]
3 years ago
5

A stock has an expected return of 12.2 percent, the risk-free rate is 6 percent, and the market risk premium is 10 percent. What

must the beta of this stock be? (Do not round intermediate calculations and round your a
Business
1 answer:
matrenka [14]3 years ago
3 0

Answer:

Beta  = 0.62

Explanation:

<em>The capital pricing model establishes the relationship between expected return from a stock and its systematic  risk . The systematic risk is that which affects all players (businesses and firms) in the entire market, such risks are occassioned by changes in interest rate, exchange rate e.t.c</em>

<em>According to the model , the expected return is computed as follows</em>

E(r)   = Rf  + β(Rm-Rf)

Rf- risk -free rate, Rm-Rf - market premium

  E(r)     = 12.2%,  Rm-Rf  = 10,  β- ?

12.2 = 6%  + β× 10

10β = 12.2 -6

β=  (12.2-6)/10

     = 0.62

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4 years ago
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Here we can calculate what marginal profit would be for the 11th worker as-

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