A stock has an expected return of 14.3 per cent,the risk-free rate is 3.2 per cent,and the market risk premium is 8.1 per cent.What must the beta of this stock be?
A)1.21
B)0.94
C)1.08
D)1.37
E)0.88

Question

Quizplus · Accepted Answer

Using the Capital Asset Pricing Model (CAPM), we can calculate the beta of the stock as: 
Expected return on stock = Risk-free rate + Beta x (Market risk premium)
14.3% = 3.2% + Beta x 8.1%
Solving for beta, we get:
Beta = (14.3% - 3.2%) / 8.1% 
Beta = 1.37
Therefore, the answer is (D) 1.37.

A Stock Has an Expected Return of 14