Question

Fisher Roofing Supplies’ stock has a beta of 1.23. It's required

return is 11.75% and the risk-free rate is 4.3%. What is the
required rate of return in the market?

Answer 1

The required rate of return in the market can be calculated using the risk-free rate, beta, and market risk premium.

Step-by-step explanation:

The required rate of return in the market can be calculated using the formula:

Required Rate of Return = Risk-Free Rate + (Beta x Market Risk Premium)

Given that the risk-free rate is 4.3% and the required return for Fisher Roofing Supplies' stock is 11.75%, we can use these values to calculate the market risk premium:

Market Risk Premium = Required Return - Risk-Free Rate

Substituting the values into the formula, we get:

Market Risk Premium = 11.75% - 4.3% = 7.45%

Finally, we can calculate the required rate of return in the market:

Required Rate of Return = 4.3% + (1.23 x 7.45%) = 13.04%