Question

A stock has a beta of 1.20, the expected return on the market is 10 percent, and the risk-free rate is 4.1 percent. What must the expected return on this stock be

Answer 1

16.1%

Step-by-step explanation:

According to CAPM :

expected return = risk free rate + ( beta x expected market return)

4.1% + (1.2 x 10%) = 16.1%