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Steven, M.Acc.
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Category: Business and Finance Homework
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Experience:  Instructor and accountant. Master's degree in Accounting.
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A stock has a beta of .85, the expected return on the market

Resolved Question:

A stock has a beta of .85, the expected return on the market is 11 percent, and the risk-free rate is 4.1 percent. What must the expected return on the stock be?
Submitted: 2 years ago.
Category: Business and Finance Homework
Expert:  Steven, M.Acc. replied 2 years ago.
Hi again,

Thanks for requesting me!

Rs = the stock's expected return
Rf = the risk-free rate
Rm = the expected return on the market
β = the stock's beta

Rs = Rf + β(Rm – Rf)
Rs = 0.041 + 0.85(0.11 – 0.041)
Rs = 0.041 + 0.05865
Rs = 0.09965
Rs = 9.965%
Steven, M.Acc., Instructor
Satisfied Customers: 740
Experience: Instructor and accountant. Master's degree in Accounting.
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