Question

Given Required ROR (k)= Rf + Risk Premiumxßi

If a firm's ß is 3, and the market return is 10%, what is the required return on the firm's stock if
the risk-free rate is 5%?​

Answer 1

Answer:

The Required rate of return is 20%

Explanation:

As given equation ROR = Rf + risk premium  x beta

Beta = 3

Rm = 10%

Rf = 5%

Risk premium  = Rm - Rf

Risk Premium = 10% - 5%

Risk Premium = 5%

Using ROR =  Rf + Risk Premium x  Beta

ROR = 5% + 5% x 3

ROR = 20%