Question

Magee Company's stock has a beta of 1.20, the risk-free rate is 4.50%, and the market risk premium is 5.00%. What is Magee's required return

Answer 1

Answer:

10.50%

Explanation:

Calculation for Magee's required return

Using this formula

Required return=Risk-free rate+Beta(Market risk premium)

Let plug in the formula

Required return= 4.50% + 1.20(5.00%) .

Required return=4.50%+6%

Required return= 10.50%

Therefore Magee's required return will beb10.50%