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26-10-2020
Business

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A stock has an expected return of 12.4 percent, the risk-free rate is 6.5 percent, and the market risk premium is 10 percent. What must the beta of this stock be? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Respuesta :

tutorAnne tutorAnne

26-10-2020

Answer beta of this stock =0.59

Explanation:

According to Capital Asset Pricing Model CAPM, we have that

Expected return= risk free rate+(betaXmarket risk premium)

12.4=6.5 + beta x 10

Beta=(12.4 - 6.5)/10

=0.59

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