Answered

Welcome to Westonci.ca, where curiosity meets expertise. Ask any question and receive fast, accurate answers from our knowledgeable community. Join our Q&A platform to get precise answers from experts in diverse fields and enhance your understanding. Join our platform to connect with experts ready to provide precise answers to your questions in different areas.

Bama Entertainment has common stock with a beta of 1.22. The market risk premium is 8.1 percent and the risk-free rate is 3.9 percent. What is the expected return on this stock?
a) 13.31 percent
b) 12.67 percent
c) 12.40 percent
d) 13.78 percent
e) 14.13 percent

Sagot :

Answer:

The answer is "Option d"

Explanation:

[tex]ER= RFR+ Beta \ stock \ (P)\\\\ER= Annual \ return\\\\RFR = Risk \ free \ interest \ rate =3.9\%\\\\Beta= beta \ of \ stock = 1.22\\\\P= market\ premium=8.1\%\\\\[/tex]

Putting the value into the formula:

[tex]ER=3.9 + 1.22 (8.1)\\\\[/tex]

     [tex]= 13.78\%[/tex]

Thank you for your visit. We are dedicated to helping you find the information you need, whenever you need it. Your visit means a lot to us. Don't hesitate to return for more reliable answers to any questions you may have. Stay curious and keep coming back to Westonci.ca for answers to all your burning questions.