Hefty shares has a beta of 1.2.If the risk-free rate is 7% and the market risk premium is 6.5%, what is the required rate of return on Hefty?
A)14.8%
B)14.4%
C)12.4%
D)13.5%

Question

Quizplus · Accepted Answer

The required rate of return can be calculated using the Capital Asset Pricing Model (CAPM) formula: Required Return = Risk-Free Rate + (Beta * Market Risk Premium). Plugging in the values: Required Return = 7% + (1.2 * 6.5%) = 7% + 7.8% = 14.8%.

Hefty Shares Has a Beta of 1