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A stock has a beta of 0.95, the expected return on the market is 13.25, and...

A stock has a beta of 0.95, the expected return on the market is 13.25, and the risk-free rate is 3.66. What must the expected return on this stock be? Please explain your answer.

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Answer #1

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

=3.66+0.95*(13.25-3.66)

=12.7705%

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