A stock with a beta of zero would be expected to have a rate of return...

Question

Question

A stock with a beta of zero would be expected to have a rate of return equal to:

-the risk-free rate.

-the market rate.

-the prime rate.

-the market rate less the risk-free rate.

-zero.

business finance

Answer 1

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Answer #1

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

Putting beta = zero

We get,

Expected return = the Risk free rate

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Answer 2

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