The markets in general are paying a 1% real rate of return. Inflation is expected to be 3%. RJH stock commands an 8% risk premium. What is the expected rate of return on RJH stock?
A) 1%
B) 4%
C) 9%
D) 12%

Question

Quizplus · Accepted Answer

The expected rate of return on RJH stock is calculated by adding the real rate of return (1%), the inflation rate (3%), and the risk premium (8%), which equals 12%.

The Markets in General Are Paying a 1% Real Rate