Question

Assume that the risk-free rate is 4% and the required return on the market is 11%. What is the required rate of return on a stock with a beta of 1.9

Answer 1

24.9%

Step-by-step explanation:

Risk free rate is 4%

Required return on the market is 11%

Beta is 1.9

Therefore the required rate of return on a stock can be calculated as follows

= 4% + 1.9×11

= 4% + 20.9

= 24.9%

Hence the required rate of return on a stick is 24.9%