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Alenkinab [10]
2 years ago
12

If the expected rate of return on the market portfolio is 12% and T-bills yield 6%, what must be the beta of a stock that invest

ors expect to return 10%?
Business
1 answer:
DENIUS [597]2 years ago
8 0

Answer:

the beta of the stock is 0.67

Explanation:

The computation of the beta of the stock is shown below

As we know that

As per CAPM model

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

0.10 = 0.06 + beta × (0.12 - 0.06)

Beta = 0.04 ÷ 0.06

= 0.67

Hence, the beta of the stock is 0.67

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

And, the same is to be considered

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