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How do I solve this? Need to show work. Question: Common stock of PR Co. has...

How do I solve this? Need to show work.

Question: Common stock of PR Co. has an expected return of 12%. The expected market return is 14% and the risk-free rate is 2%. What is PR Co’s beta coefficient?

Answer: 0.83

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Answer #1

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

12=2+beta(14-2)

Beta=(12-2)/(14-2)

Which is equal to

=0.83(approx).

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