The risk-free rate of return is 4 percent and the market risk premium is 8 percent. What is the expected rate of return on a stock with a beta of 1.28? a. 9.12 percent b. 10.24 percent c. 13.12 percent d. 14.24 percent e. 5.36 percent

Q: A stock has an expected return of 14.3 percent, the risk-free rate is 3.9 percent, and the market…

A: Given: Expected return = 14.3% Risk free rate = 3.9% Market risk premium = 7.8%

Q: The risk-free rate is 3.4 percent and the market expected return is 11.9 percent. What is the…

A: The expected return of a stock can be found out using the CAPM formula. Given, Rf = Risk free…

Q: Stock R has a beta of 2.0, Stock S has a beta of 0.45, the requiredreturn on an average stock is…

A: Calculation of difference between riskier stock and less risky stock: Answer: The difference between…

Q: Stock A has a risk premium of 5.6 percent. If Treasury bills yield 2.3 percent and the expected…

A: The evaluation of the systematic risk or volatility of a stock or the portfolio as compared to the…

Q: The expected return for a stock, calculated using the CAPM is 13.5%. The risk free rate is 7.5% and…

A: In the given problem we are required to calculate the implied return on market using following…

Q: Stock A has a risk premium of 8.67 percent. If Treasury bills yield 2.3 percent, the required rate…

A: According to CAPM model: Rs=Rf+beta×Rm-Rf where, Rs= required return of stock Rf = Risk free rate…

Q: A stock has an expected return of 13.1 percent, its beta is 1.70 and the risk free premium rate is…

A: Risk market return is used in CAPM model to calculate expected return on the stock and it is also…

Q: The risk-free rate of return is 5.4 percent and the market risk premium is 13 percent. What is the…

A: CAPM model is the model of valuing the required return an investor demands from a particular stock.…

Q: JaiLai Cos. stock has a beta of 0.8, the current risk-free rate is 6.2 percent, and the expected…

A: The provided information are: Beta = 0.80 Expected return = 12% Risk free rate = 6.2%

Q: The stock of Yakir Development has a beta of 1.31. The risk-free rate of return is 1.5 percent and…

A: The Capital Asset Pricing Model (CAPM) is a mathematical model that explains the relationship…

Q: Alpha Company has a beta of 3.25 and a standard deviation of returns of 27%. The return on the…

A: In this question we require to calculate the risk premium on the market and also required rate of…

Q: A stock has an expected return of 7.8 percent. The expected return on the market is 9 percent and…

A: Beta less than 1 signifies less systematic risk.

Q: A stock has a beta of 0.8 and an expected return of 10.6 percent. If the risk-free rate is 2.7…

A: Given: Beta =0.8Expected return =10.6% Risk free rate =2.7%

Q: Assume the expected return on the market is 7 percent and the risk-free rate is 4 percent. a. What…

A: In the given question we have two parts: In Part (A) we need to compute expected return for a stock…

Q: The risk-free rate of return is 3.7 percent and the market risk premium is 6.2 percent. What is the…

A: The given question can be solved using capital asset pricing model (CAPM)

Q: A stock has an expected return of 16 percent, its beta is 0.45, and the risk-free rate is 6.4…

A: CAPM is an investment theory that establishes the relationship between the expected return and the…

Q: The market risk premium is 10% and the risk-free rate is 4%, beta of the stock is 0.75, then…

A: The Capital Asset Pricing Model (CAPM) refers to the model which tells us how the financial markets…

Q: Stock A has a beta of 0.87 and an expected return of 9.21 percent. Stock B has a beta of 1.36 and an…

A: Expected return as per CAPM = Risk free rate + Beta * Market risk premium

Q: Assume that the risk-free rate is 6 percent and the expected return on the market is 13 percent.…

A: Given details are : Risk free rate (Rf) = 6% Expected return on market (Rm) = 13% Beta of stock =…

Q: A stock has an expected return of 14.1 percent, a beta of 1.8, and the return on the market is 9.8…

A: Expected return (Re) = 14.1% Beta (B) = 1.8 Market return (Rm) = 9.8% Risk free rate = Rf

Q: Stock Y has a beta of 1.35 and an expected return of 14.30 percent. Stock Z has a beta of 0.75 and…

A: Formula: Expected return = Risk free rate + (Beta*Market risk premium)

Q: A stock has an expected return of 7.72 percent, the risk-free rate is 2.9 percent, and the market…

A: We can calculate Beta by using the CAPM model as it helps in showing the relationship between the…

Q: A stock has a beta of 1.5, the expected return on the market is 10 percent, and the risk-free rate…

A: In given question we need to compute the expected return for stock. According to Capital asset…

Q: The risk-free rate is 4.2 percent and the market expected return is 11.1 percent. What is the…

A: The cost of equity is the rate of return required by the equity investors. We can use the CAPM…

Q: What is the expected return on Verdoni’s stock?

A: The expected return is the return expected by the investors on their investment. It is the…

Q: A stock has a beta of 1.68, the expected return on the market is 14.72, and the risk-free rate is…

A: As per CAPM formula Expected return on stock = Risk free return + Beta*(Market return-Risk free…

Q: A stock has an expected return of 13.5 percent, its beta is 1.16, and the expected return on the…

A: Expected return = 13.5%  Beta = 1.16 Market return = 12.50%

Q: JaiLai Cos. stock has a beta of 0.7, the current risk-free rate is 6.1 percent, and the expected…

A: CAPM model provides formula that calculates the expected return on stock based on its level of risk.…

Q: The risk-free rate is 6 percent and the expected market risk premium is 8 percent. What is the…

A: Following details are given to us in the question : Risk free rate (Rf) = 6% Beta (B) = 0.7 Market…

Q: CEPS Group stock has a beta of 0.95. The risk-free rate of return is 3.75 percent and the market…

A:

Q: A stock has an expected return of 13.6 percent, the risk-free rate is 3.7 percent, and the market…

A: In the above question we require to compute the expected beta of the stock. This question can be…

Q: Snow Fooling stock has an expected return of 8.17 percent and its reward-to-risk ratio is 6.9…

A:

Q: Stock R has a beta of 1.5, Stock S has a beta of 0.75, the expected rate ofreturn on an average…

A: The riskiness of security is measured by "Beta". Beta measures the volatility of the stock with…

Q: A stock has a beta of 1.12, the expected return on the market is 10.6 percent, and the risk-free…

A: A model that represents the relationship of the required return and beta of a particular asset is…

Q: Two stocks, A and B, have beta coefficients of 0.8 and 1.4, respectively. If the expected return on…

A: The evaluation of the systematic risk or volatility of a stock or the portfolio as compared to the…

Q: A stock has a beta of 0.7 and an expected return of 7.3 percent. If the risk-free rate is 1.3…

A: Beta = 0.7 Expected return = 7.3% Risk free rate = 1.3%

Q: A stock has an expected return of 12.7 percent and a beta of 1.18, and the expected return on the…

A: Given information: Expected return is 12.7% Beta value is 1.18 Expected return on market is 11.7%

Q: A stock has a beta of 1.2 and an expected return of 11.8 percent. A risk-free asset currently earns…

A: Portfolio weight refers to the holding of all assets or investments. Weight of risk-free asset in a…

Q: Using CAPM A stock has beta of 1.04, the expected return on the market is 10 percent, and the…

A: The expected return is the minimum required rate of return which an investor required from the…

Q: 1) The risk-free rate is 3.7 percent and the expected return on the market is 12.3 percent. Stock A…

A: If the required return (computed using CAPM) is less than the expected return for stock A, the stock…

Q: The risk-free rate of return is 4.8 percent and the market risk premium is 15 percent. What is the…

A: Risk free rate = 4.8% Market risk premium = 15% Beta = 1.80

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary. 

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.