A stock has an expected return of 14.5 percent, the risk-free rate is 4 percent and the return on the market is 11 percent. What is this stock's beta?
A) 1.5
B) 3.0
C) 1.05
D) 0.94

Question

Quizplus · Accepted Answer

The stock's beta can be calculated using the Capital Asset Pricing Model (CAPM): Expected Return = Risk-Free Rate + Beta * (Market Return - Risk-Free Rate). Plugging in the values: 14.5% = 4% + Beta * (11% - 4%), solving for Beta gives 1.5.

A Stock Has an Expected Return of 14