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nvestors require a return of 14.15 percent on Industrial Industries stock and require a return of 10.90 percent on the market. If the stock has a beta of 1.5. What is the risk-free rate of return?

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 4P: An analyst has modeled the stock of a company using the Fama-French three-factor model. The market...

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Question

Investors require a return of 14.15 percent on Industrial Industries stock and require a return of 10.90 percent on the market. If the stock has a beta of 1.5. What is the risk-free rate of return?

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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