A stock has a beta of 1.2. The risk-free rate is 4%. Assume that the CAPM holds. A. What is the expected return for the stock if the expected return on the market is 7%? B. What is the expected return for the stock if the market risk premium is 7%?

A stock has a beta of 1.2. The risk-free rate is 4%. Assume that the CAPM holds. A. What is the expected return for the stock if the expected return on the market is 7%? B. What is the expected return for the stock if the market risk premium is 7%?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter2: Risk And Return: Part I

Section: Chapter Questions

Problem 3P: Suppose that the risk-free rate is 5% and that the market risk premium is 7%. What is the required...

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A stock has a beta of 1.2. The risk-free rate is 4%. Assume that the CAPM holds.

A. What is the expected return for the stock if the expected return on the market is 7%?

B. What is the expected return for the stock if the market risk premium is 7%?

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