if the risk free rate is 4 %, the expected return on the market portfolio is 12% and the beta of stock b is 0.6 , what is the required rate of return for stock b according to the capital asset pricing model (capm)? (round your answer rounded to one decimal place and record without a percent sign).

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04-11-2022
Business

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if the risk free rate is 4 %, the expected return on the market portfolio is 12% and the beta of stock b is 0.6 , what is the required rate of return for stock b according to the capital asset pricing model (capm)? (round your answer rounded to one decimal place and record without a percent sign).

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tutorconsortium126 tutorconsortium126 · Answer 1 · 2022-11-08T03:00:45-05:00

The required rate of return for stock is 115.2%. You determine the percentage change from the start of the period to the end when computing the rate of return.

What does "rate of returns" mean?

A rate of return (RoR) is the net gain or loss of an investment over a given time period, represented as a percentage of the investment's initial cost. Simply divide the total return on an investment by the cost of the initial investment to arrive at the rate of return (RoR).

A percentage value that reflects the outcome lets you know how well your investment has done since you made it. The percentage change in an investment's value is represented by the annual rate of return.

The risk free rate is 4%

The expected return on the market portfolio is 12%

The beta is 0.6

Therefore the required rate of return can be calculated as follows

= 4 × 0.6(12×4)

= 4 × 0.6(48)

= 4 × 28.8

= 115.2%

Hence the required rate of return is 115.2%%

To learn more about rate of return, refer to:

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