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AA Corporation's stock has a beta of 0.7. The risk-free rate is 6%, and the expected return on the market is 8%. What is the required rate of return on AA's stock? Do not round intermediate calculations. Round your answer to one decimal place.

Respuesta :

Answer:

the  required return is 7.4%

Explanation:

The computation of the required rate of return is shown below:

Required rate of return is

= Risk free rate + beta × (market rate of return - risk free rate)

= 6% + 0.7 × (8% - 6%)

= 6% + 0.7 × 2%

= 6% + 1.4%

= 7.4%

Hence, the  required return is 7.4%

We simply applied the above formula so that the correct value could come

And, the same is to be considered

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