Asked by
Sonia Turitz
on Nov 28, 2024
Verified
Ritter Company's stock has a beta of 1.40,the risk-free rate is 4.25%,and the market risk premium is 5.50%.What is Ritter's required rate of return?
A) 11.36%
B) 11.65%
C) 11.95%
D) 12.25%
Beta
A measure of a security's volatility in relation to the overall market; used in the capital asset pricing model to determine the expected return of an asset.
Risk-Free Rate
The rate of return of an investment with no risk of financial loss, typically represented by government bonds.
Market Risk Premium
The extra return investors demand for holding a risky market portfolio instead of risk-free assets.
- Absorb the principles of the Capital Asset Pricing Model (CAPM) and its relevance in calculating necessary returns on stocks.
Verified Answer
AQ
Learning Objectives
- Absorb the principles of the Capital Asset Pricing Model (CAPM) and its relevance in calculating necessary returns on stocks.