Asked by
Kayla Hensley
on Nov 03, 2024
Verified
Assume that a security is fairly priced and has an expected rate of return of 0.17. The market expected rate of return is 0.11, and the risk-free rate is 0.04. The beta of the stock is
A) 1.25.
B) 1.86.
C) 1.
D) 0.95.
Risk-Free Rate
The theoretical rate of return of an investment with zero risk, often represented by the yield on government bonds like U.S. Treasury notes.
Expected Rate
The rate of return anticipated on an investment or asset based on historical data or specified models.
- Understand the expected return-beta relationship as a fundamental aspect of CAPM.
- Appraise stocks through the projection of their performance vis-à-vis predictions made by the CAPM.
Verified Answer
ME
Learning Objectives
- Understand the expected return-beta relationship as a fundamental aspect of CAPM.
- Appraise stocks through the projection of their performance vis-à-vis predictions made by the CAPM.