contestada

stock a's stock has a beta of 1.30, and its required return is 11.50%. stock b's beta is 0.80. if the risk-free rate is 2.75%, what is the required rate of return on b's stock? (hint: first find the market risk premium.) do not round your intermediate calculations.

Respuesta :

9.52% is the required rate of return on b's stock.

How to calculate rate of return?

Return is the financial term for an investment's profit. It includes any fluctuation in the investment's value as well as any cash flows that the investor receives as a result of the investment, including interest payments, coupons, cash dividends, stock dividends, and the payout from derivatives or structured products.

Required rate = Risk free rate + Beta of stock × market risk premium

Hence for Stock A :

13.75% = 2.75% + 1.30 × market risk premium

0.1375 = 0.0275 + 1.30 × market risk premium

Market risk premium =

Rm =

Rm = 0.084615

Market risk premium =  8.4615%

Hence for Stock B:

Required rate = 2.75% + 0.8 × 8.4615%

                      = 0.0275 + 0.8 × 0.084615

                      = 0.095192

                      = 9.52%

To know more about rate of return, refer;

https://brainly.com/question/24232401

#SPJ4

Otras preguntas