Question

The stock of Stock M has a beta of 1.48 and an expected return of 12.50 percent. The risk-free rate of return is 5 percent. What is the expected return on the market?

Answer 1

10.07%

Step-by-step explanation:

Calculation for the Expected return

Using this formula

Expected return =(Expected return-Risk-free rate)/Beta+Risk-free rate

Let plug in the formula

Expected return=(0.125 –0.05)/1.48 + 0.05

Expected return=0.075/1.48+0.05

Expected return=0.05068+0.05

Expected return=0.1007*100

Expected return=10.07%

Therefore the expected return on the market will be 10.07%