11. (A) Given the expected return on the market, the expected return on TIG stock and...

Question

Question

11. (A) Given the expected return on the market, the expected return on TIG stock and the risk- free rate that are all shown

business finance

Answer 1

Answer #1

Ra = Rfr +[Ba*(Rm-Rfr)]

Where:

Ra = Expected return on a security 8.5%
Rrf = Risk-free rate 0.75%
Ba = Beta of the security
Rm = Expected return of the market 7.5%

8.5= .75+[Ba*(7.5-.75)]

8.5= .75+6.75Ba

7.75/6.75= Ba

Ba= 1.148 or 1.15

beta is 1.15

Answer 2

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