Question

A stock has a required return of 13% the risk-free rate of return is 5% and the market premium is 7%. what must the beta of this stock be

Answer 1

the beta of the stock is 1.14

Step-by-step explanation:

The computation of the beta is shown below:

As we know that

Required return = risk-free rate + beta × market risk premium

13% = 5% + beta × 7%

8% = beta × 7%

So, the beta is 1.14

Hence, the beta of the stock is 1.14

We simply applied the above formula so that the correct value could come

And, the same is to be considered