A stock has an expected return of 10.8 percent, the risk-free rate is 4 percent,

Question

A stock has an expected return of 10.8 percent, the risk-free rate is 4 percent, and the market risk premium is 5 percent. What must the beta of this stock be? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.)

A stock has an expected return of 10.8 percent, the risk-free rate is 4 percent, and the market risk premium is 5 percent. What must the beta of this stock be? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.)

Explanation / Answer

Expected return = Rf+×Rp

Rf is risk free return

Rp is risk premium

10.8% = 4%+×5%

Beta = 1.36

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