4. A stock has a beta of 2.2, the risk-free rate is 6 percent, and the...
4. A stock has a beta of 2.2, the risk-free rate is 6 percent, and the expected return on the market is 12 percent. Using the CAPM, what would you expect the required rate of return on this stock to be? What is the market risk premium?
Homework Answers
required rate of return on the stock=6%+2.2*(12%-6%)=19.2%
Market risk premium=12%-6%=6%
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