The stock of United Industries has a beta a 1.14 and an expected return of 12.2.

Question

The stock of United Industries has a beta a 1.14 and an expected return of 12.2. The risk-free rate of return is 4 percent. What is the expected return on the market? 9.85 11.19 8.69 12.74 8.20
The stock of United Industries has a beta a 1.14 and an expected return of 12.2. The risk-free rate of return is 4 percent. What is the expected return on the market? 9.85 11.19 8.69 12.74 8.20
The stock of United Industries has a beta a 1.14 and an expected return of 12.2. The risk-free rate of return is 4 percent. What is the expected return on the market? 9.85 11.19 8.69 12.74 8.20
9.85 11.19 8.69 12.74 8.20 9.85 11.19 8.69 12.74 8.20

Explanation / Answer

The stock of United Industries has a beta a 1.14 and an expected return of 12.2. The risk-free rate of return is 4 percent. What is the expected return on the market?

Expected Return = (Market Expected Return - Risk Free Return) x Beta + Risk Free

12.2% = (Market Expected Return - 4%)(1.14) + 4%

8.2% = (Market Expected Return - 4%)(1.14)

8.2%/1.14 = Market Expected Return - 4%

7.19% = Market Expected Return - 4%

Market Expected Return = 7.19% + 4% = 11.19%

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