Question

Oriole, Inc., stock has a beta of 1.60. If the expected market return is 17.5 percent and the risk-free rate is 7.0 percent, what does CAPM indicate the appropriate expected return for Oriole stock is

Answer 1

Answer:

23.8

Explanation:

Oriole stock have a beta of 1.60

The expected market return is 17.5

The risk free rate is 7.0

Therefore the expected return for oriole stock can be calculated as follows

= 7 + 1.60(17.5-7)

= 7+ 1.60(10.5)

= 7 + 16.8

= 23.8