nope8029 nope8029

24-06-2020
Business

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Suppose the common stock of United Industries has a beta of 1.28 and an expected return of 15.47 percent. The risk-free rate of return is 3.7 percent while the inflation rate is 4.2 percent. What is the expected market risk premium

Respuesta :

nicof2010 nicof2010

25-06-2020

Answer:

The expected market risk premium is 9.20%

Explanation:

In order to calculate the expected market risk premium we would have to calculate the following formula:

expected market risk premium=(Rs-Rf)/β

Rf=3.7%

β=1.28

Rs=15.47%

expected market risk premium=(15.47%-3.7%)/1.28

expected market risk premium=9.20%

The expected market risk premium is 9.20%

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