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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%
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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%

User Eder
by
4.2k points

1 Answer

5 votes

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%

User Luiscosta
by
4.9k points
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