Question

g A stock has an expected return of 16.00%. The risk-free rate is 1.63% and the market risk premium is 10.53%. What is the β of the stock?

Answer 1

Answer: Beta = 1.36

Explanation:

Using the  Capital Asset Pricing Model CAPM formulae, we have that  

Expected return= risk free rate+(betaXmarket risk premium)

16= 1.63 + ( beta x 10.53)

16-1.63= beta x 10.53

14.37/10.53 = beta

Beta = 1.36