Financial accounting ABC Corporation's stock has a beta of 1.25. If the marketrisk premium is 7% and the risk-free rate is 3.5%,calculate the expected return on this stock using CAPM.

Step 1: Define Expected Return (CAPM)The Capital Asset Pricing Model (CAPM) is used to calculate the…

Answered: ABC Corporation's stock has a beta of…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 7P

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ABC Corporation's stock has a beta of 1.25. If the market risk premium is 7% and the risk-free rate is 3.5%, calculate the expected return on this stock using CAPM.