Find the required rate of return for equity investors of a firm with a beta of...

Question

Question

Find the required rate of return for equity investors of a firm with a beta of 1.3 when the risk free rate is 5%, and the return on the market is 10%

business finance

Answer 1

Answer #1

Beta = 1.3

Risk-free rate = 5%

Market return = 10%

Required return on Equity = Risk-free rate + [beta *(Market return - Risk-free rate)]

Required return on Equity = 5% + [1.3 * (10% - 5%)

Required return on Equity = 11.50%

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Answer 2

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