Question

The risk-free rate of return is 3.2 percent and the market risk premium is 6.1 percent. What is the expected rate of return on a stock with a beta of 1.19? (round answer to whole number with two decimal points: i.e., use 1.23 percent instead of 0.0123)

Answer 1

10.46%

Step-by-step explanation:

The risk-free rate of return is 3.2%

The market risk premium is 6.1%

The stock beta is 1.19

Therefore, the expected rate of return on the stock can be calculated as follows

Rate of return= Risk-free rate+beta(market Risk premium)

= 3.2% + 1.19×6.1%

= 3.2% + 7.259

= 10.46%

Hence the expected rate of return on the stock is 10.46%