Question

Assume that the risk-free rate is 2.5% and the expected return on the market is 12%. What is the required rate of return on a stock with a beta of 1.1? Round your answer to two decimal places.

Answer 1

15.7%

Step-by-step explanation:

According to CAPM,

required return = risk free rate + (beta x market expected rate of return)

= 2.5% + 1.1x 12% = 15.7%