MacLeod Inc.'s stock has a beta of 1.3 and a required rate of return of 0.14....

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Question

MacLeod Inc.s stock has a beta of 1.3 and a required rate of return of 0.14. If the expected rate of return of the U.S. gove

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Answer 1

Answer #1

required return=risk-free rate +Beta*(market rate- risk-free rate)

0.14=0.04+1.3*(market rate-0.04)

(0.14-0.04)=1.3*(market rate-0.04)

market rate=(0.14-0.04)/1.3+0.04

=0.1169(Approx).

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Answer 2

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