Question

Genting Berhad is a Malaysian conglomerate with holdings in plantations and tourist resorts. The beta estimated for the firm relative to the Malaysian stock exchange is 1.15, and the long-term government borrowing rate in Malaysia is 11.5%. The Malaysian risk premium is 12%. The expected return on the stock for a Malaysian National who is not Internationally diversified is closest to:

Answer 1

25.3%

Step-by-step explanation:

The expected return can be determined using the capital asset pricing model

The expected return = risk free return + (risk premium x beta)

11.5% + (1.15 x 12%) = 25.3%