Question

A stock has an expected return of 13.4 percent, the risk-free rate is 9 percent, and the market risk premium is 10 percent. What must the beta of this stock be?

Answer 1

Answer: 0.44

Step-by-step explanation:

From the question, we are informed that a stock has an expected return of 13.4 percent, the risk-free rate is 9 percent, and the market risk premium is 10 percent.

The beta of this stock be calculated as:

= (13.4% - 9%) / 10%

= 4.4% / 10%

= 0.044 / 0.10

= 0.44

Therefore, the beta of the stock is 0.44