Question

The beta of RicciCo.'s stock is 3.2, whereas the risk-free rate of return is 9 percent. If the expected return on the market is 18 percent, then what is the expected return on RicciCo.?a. 28.80%b. 48.60%c. 57.60%d. 37.80%

Answer 1

d. 37.80%

Step-by-step explanation:

Calculation for what is the expected return on RicciCo

Using this formula

Expected return = Risk free rate + Beta *(Market return - Risk free rate)

Let plug in the formula

Expected return = 9 + 3.2*(18-9)

Expected return = 9 + 3.2*9

Expected return= 37.80%

Therefore the expected return on RicciCo will be

37.80%