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06-03-2020
Business

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You are considering buying a stock with a beta of 3.05. If the risk-free rate of return is 8.0%, and the expected return for the market is 18.0%, what should the expected rate of return be for this stock?

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10-03-2020

Answer:

38.5%

Explanation:

Rf = 8.0%

Rm = 18.0%

Beta = 3.05

RRR ?

from the given data the capital asset pricing model will be used to calculate the RRR

RRR = Rf + β (Rm - Rf)

=8.0 + 3.05 (18.0-8)

=38.5%

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