What is the expected return on a stock with a beta of 0.8,given a risk free rate of 3.5% and an expected market return of 15.5%?
A) 3.8%
B) 13.1%
C) 15.6%
D) 19.1%

Question

Quizplus · Accepted Answer

The formula for the expected return of a stock is:
Expected return = Risk-free rate + Beta x (Market return - Risk-free rate)
Plugging in the provided values:
Expected return = 3.5% + 0.8 x (15.5% - 3.5%)
Expected return = 3.5% + 0.8 x 12%
Expected return = 3.5% + 9.6%
Expected return = 13.1%
Therefore, the best choice is B with an expected return of 13.1%.

What Is the Expected Return on a Stock with a Beta