Stock A's stock has a beta of 1.30, and its required return is 11.00%. Stock B's beta is 0.80. If the risk-free rate is 4.75%, what is the required rate of return on B's stock? (Hint: First find the market risk premium.) Select the correct answer. a. 8.45% b. 8.50% c. 8.60% d. 8.55% e. 8.65%

Stock A's stock has a beta of 1.30, and its required return is 11.00%. Stock B's beta is 0.80. If the risk-free rate is 4.75%, what is the required rate of return on B's stock? (Hint: First find the market risk premium.) Select the correct answer. a. 8.45% b. 8.50% c. 8.60% d. 8.55% e. 8.65%

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

Stock A's stock has a beta of 1.30, and its required return is 11.00%. Stock B's beta is 0.80. If the risk-free rate is 4.75%, what is the required rate of return on B's stock? (Hint: First find the market risk premium.)

Select the correct answer.

a. 8.45%

b. 8.50%

c. 8.60%

d. 8.55%

e. 8.65%

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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Question
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vi. Subject:- Accounting
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