Suppose the current 10-year Treasury yield is 3%. The market’s required rate of return is estimated...
Suppose the current 10-year Treasury yield is 3%. The market’s required rate of return is estimated to be 7.5%. The β for Scofield Enterprises is estimated to be 1.35. What is the required rate of return for Scofield Enterprises?
Homework Answers
The required rate of return is computed as shown below:
= risk free rate + Beta x ( return on market - risk free rate )
= 0.03 + 1.35 x ( 0.075 - 0.03 )
= 9.075%
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