The expected return on stock A is 11.70 percent. The expected return on stock B is 9.40 percent. Assuming CAPM holds, if the beta of stock A is higher than the beta of stock B by 0.24, what should the risk premium be? (Round answer to 2 decimal places, e.g. 2.36%.) Risk premium %

The expected return on stock A is 11.70 percent. The expected return on stock B is 9.40 percent. Assuming CAPM holds, if the beta of stock A is higher than the beta of stock B by 0.24, what should the risk premium be? (Round answer to 2 decimal places, e.g. 2.36%.) Risk premium %

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

The expected return on stock A is 11.70 percent. The expected return on stock B is 9.40 percent. Assuming CAPM holds, if the beta
of stock A is higher than the beta of stock B by 0.24, what should the risk premium be? (Round answer to 2 decimal places, e.g. 2.36%.)
Risk premium
%

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