The risk-free rate is 4.5%.The expected return on the market is 13% with a standard deviation of 15%.What is the required rate of return for Stock X if it has a beta of 1.4?
A)16.40%
B)18.20%
C)20.50%
D)22.70%

Question

Quizplus · Accepted Answer

The required rate of return for Stock X can be calculated using the Capital Asset Pricing Model (CAPM) formula: Required Return = Risk-Free Rate + Beta * (Market Return - Risk-Free Rate). Plugging in the values: Required Return = 4.5% + 1.4 * (13% - 4.5%) = 4.5% + 1.4 * 8.5% = 4.5% + 11.9% = 16.4%.

The Risk-Free Rate Is 4