question archive A stock has an expected return of 14 percent
A stock has an expected return of 14 percent
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A stock has an expected return of 14 percent. The risk-free rate is 5 percent, and the expected return of the market is 11 percent. What is the beta of the stock? Answer:
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Beta of the stock will be calculated according to the Capital Asset pricing model.
Expected rate of return of stock= Risk free rate+ Beta(Market rate of return - Risk free rate )
14= 5+ Beta(11-5)
Beta= (14-5)/6)= 1.5.
Beta of the stock is 1.5.
