What is the required return for each stock? What is required return for stock B? Scenario Probability Stock A Stock B Market Risk-free rate Bust 0.25 -0.15 -0.05     Normal 0.55 0.2 0.1     Boom 0.2 0.4 0.3     Beta   1.2 0.9     Expected return       0.13

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
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What is the required return for each stock? What is required return for stock B?

Scenario

Probability

Stock A

Stock B

Market

Risk-free rate

Bust

0.25

-0.15

-0.05

   

Normal

0.55

0.2

0.1

   

Boom

0.2

0.4

0.3

   

Beta

 

1.2

0.9

   

Expected return

     

0.13

0.05

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