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Suppose that the risk-free rate is 6.5% and that the market risk premium is 5%. What is the required rate of return on a stock with a beta of 1.1? Round your answer to two decimal places.

Respuesta :

Answer:

The required return on the stock is 12%

Explanation:

According to the CAPM model the required return on a stock is the risk free rate+ the beta multiplied by the market risk premium.

The formula is Required return = Risk free rate +(Beta*market risk premium)

Now we input the numbers in the formula

Required return = 0.065+(1.1*0.05)=0.12= 12%

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