Suppose the Carz Corporation's common stock has a beta of 0.9. If the risk-free rate is 3.5% and the expected market return is 9%,the expected return for JumpStart's common stock is:
A) 3.5%.
B) 8.45%.
C) 9.00%.
D) 9.15%.
E) 9.24%.

Question

Quizplus · Accepted Answer

The expected return can be calculated using the Capital Asset Pricing Model (CAPM): Expected Return = Risk-Free Rate + Beta * (Market Return - Risk-Free Rate). Substituting the given values: 3.5% + 0.9 * (9% - 3.5%) = 8.45%.

Suppose the Carz Corporation's Common Stock Has a Beta of 0.9