A stock has a beta of 1.6, the expected return on the market is 17 percent, and the risk-free rate is 11.05 percent. Wha...
A stock has a beta of 1.6, the expected return on the market is 17 percent, and the risk-free rate is 11.05 percent. What must the expected return on this stock be?
a. 38.25%
b. 19.54%
c. 20.57%
d. 21.6%
e. 21.36%
Homework Answers
Ans c. 20.57%
| Expected Return = | Risk free Return + (Market Return - Risk free return)* Beta |
| Expected Return = | 11.05%+ (17% - 11.05%) * 1.6 |
| Expected Return = | 20.57% |
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