Answer:
beta= 1.5
Explanation:
The common stock of flavorful tea has an expected return of 19.65%
The return on the market is 14.5%
The risk-free rate is 4.2%
Therefore, the beta of the stock can be calculated as follows
Required return= Risk free rate+beta(market rate-risk free rate)
19.65%= 4.2%+beta(14.5%-4.2%)
19.65%= 4.2% + 14.5beta-4.2beta
19.65%= 4.2% + 10.3beta
19.65%-4.2%= 10.3beta
15.45%= 10.3beta
beta= 15.45/10.3
beta= 1.5
Hence the beta of this stock is 1.5
