Answer:
r = 0.24 or 24%
Explanation:
The expected rate of return or the required rate of return is the minimum return that investors anticipate on a stock based on the systematic risk of that stock as measured by its beta. The CAPM equation can be used to calculate the expected rate of return on a stock. The formula is,
r = rRF + Beta * rpM
Where,
- rRF is the risk free rate
- rpM is the risk premium on market
r = 0.042 + 1.8 * 0.11
r = 0.24 or 24%
