Question

A stock has an expected return of 11.89 percent and its reward-to-risk ratio is 7.4 percent. If the risk-free rate is 3 percent, what is the stock's beta?

Answer 1

Answer:

1.20

Explanation:

According to CAPM

expected return = risk free rate + (beta x reward to risk ratio)

11.89% = 3% + 7.4% x beta

beta = 1.20