8-4 on the market is 12%. What is the required rate of return on a stock...

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Question

8-4 on the market is 12%. What is the required rate of return on a stock with a beta of 2? EXPECTED AND REQUIRED RATES OF RET

business finance

Answer 1

Answer #1

market risk premium=market rate-risk free rate

Market rate=(3.5+4)=7.5%

Required return=risk free rate+beta*(market rate-risk free rate)

=3.5+0.8*(7.5-3.5)

=6.7%

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Answer 2

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