<p>If the long term average return on the market is 11% and the risk free rate i
ID: 2672499 • Letter: #
Question
<p>If the long term average return on the market is 11% and the risk free rate is 6%, what is the required return on stock A?<br /><br /><span>YEAR               MARKET               STOCK</span></p><p>1                         6%                      8%</p>
<p>2                         8%                      3%</p>
<p>3                         8%                      2%</p>
<p>4                        18%                    12%</p>
<p> </p>
<p>Please show how this is worked out on the financial calculator.</p>
Explanation / Answer
what is beta coefficient of stock A let the beta coefficient be b then required rate of return = 6 + 11b
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