question archive What is the required return on an investment with a beta of 1
What is the required return on an investment with a beta of 1
Subject:FinancePrice:2.86 Bought3
What is the required return on an investment with a beta of 1.2 if the risk-free rate is 2.1 percent and the return on the market is 9.0 percent Round your answer to two decimal places If the expected return on the investment is 11.4 percent, what should you do? Since the expected return select than the required return, the individual Select make the investment
Purchase A New Answer
Custom new solution created by our subject matter experts
GET A QUOTE
Answer Preview
Risk free rate = 2.1%
Beta of Investment =1.2
Return on market=9%
Return on investment = Riskfree rate + beta of
Investment ( Return on market - Risk free return)
=0.021+ 1.2(0.09-0.021)= 10.38%
Required return = 11.4%
Here, the expected return more than the required return, the stock is overvalued,so individual stock should make the Investment.
