Question

If the risk-free rate is 7.0%, the market risk premium is 9.0%, and the expected return on Security J is 23.8%, what is the beta for Security J

Answer 1

the beta for Security J is 1.87

Step-by-step explanation:

The computation of the beta is given below

As we know that

Expected return = risk free rate of return + beta ×market risk premium

23.8% = 7.0% + beta × 9.0%

So, the beta is

= (23.8% - 7.0%) ÷ 9.0%

= 1.87

Hence, the beta for Security J is 1.87