The risk-free rate of return is 5% and the market risk premium is 7%. What is the expected rate of return on a stock with a beta of 1.56? a. 15.92% b. 10.23% c. 12%

Question

asked Jul 16, 2021 39.9k views

1 Answer

Luiscosta · Answer 1 · 2021-07-21T20:34:33+0000

Answer: a. 15.92%

Step-by-step explanation:

Using the Capital Asset Pricing Model, the expected return is;

= Risk free rate + beta * Market premium

= 5% + 1.56 * 7%

= 15.92%