Calculate the risk premium on Stock C given the following information: risk-free rate = 5%, market return = 13%, Stock C = 1.3 Beta.
A)8.0%
B)10.4%
C)15.4%
D)16.9% Stock C Risk Premium = Beta x (market risk premium)
= 1)3 x (13% - 5%)

Question

Quizplus · Accepted Answer

The formula for calculating the risk premium on a stock is:
Stock Risk Premium = Beta x (Market Return - Risk-Free Rate)

Using the given information:
- Risk-Free Rate = 5%
- Market Return = 13%
- Beta for Stock C = 1.3

Stock C Risk Premium = 1.3 x (13% - 5%) = 10.4%

Therefore, the answer is B) 10.4%.

Calculate the Risk Premium on Stock C Given the Following