Question

The expected return on Share Z is 17.50% with a beta of 1.90. If the risk-free rate is 8%, then what is the expected return on the market

Answer 1

13%

Step-by-step explanation:

Expected return on market = ((Expected return - Risk-free rate) / Beta) + Risk-free rate

Expected return on market = ((17.50% - 8%) / 1.90) + 8%

Expected return on market = 9.5%/1.90 + 8%

Expected return on market = 0.05 + 0.08

Expected return on market = 0.13

Expected return on market = 13%