The stock in Bowie Enterprises has a beta of 1.10. The expected return on the market is 12.40 percent and the risk-free rate is 3.21 percent. What is the required return on the company's stock

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27-04-2022
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The stock in Bowie Enterprises has a beta of 1.10. The expected return on the market is 12.40 percent and the risk-free rate is 3.21 percent. What is the required return on the company's stock

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Parrain Parrain · Answer 1 · 2022-04-28T10:39:42+02:00

Based on the beta of Bowie Enterprises stock, the expected return on the market, and the risk free rate, the required return should be 13.32%.

What is the required return?

You can find this using the Capital Asset Pricing Model:

Required return = Risk free rate + Beta x (Market return - risk free rate)

Solving gives:

= 3.21 + 1.10 x (12.40 - 3.21)

= 13.32%

In conclusion, the return is 13.32%.

Find out more on the Capital Asset Pricing Model at https://brainly.com/question/13937576.