A stock has a beta of 2.0 , the expected return on the market is 12 percent, and

Question

A stock has a beta of 2.0 , the expected return on the market is 12 percent, and the risk-free rate is 4 percent. The expected return on this stock must be ______ percent. (Do not include the percent sign (%). Round your answer to 2 decimal places. (e.g., 32.16)) A stock has a beta of 2.0 , the expected return on the market is 12 percent, and the risk-free rate is 4 percent. The expected return on this stock must be ______ percent. (Do not include the percent sign (%). Round your answer to 2 decimal places. (e.g., 32.16))

Explanation / Answer

E(rcs) = risk free return + beta(market return - risk free return)

here

E(rcs) = 4 + 2*(12-4) = 20.00

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