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a stock has an expected return of 8.0 percent, its beta is .60, and the risk-free rate is 3 percent. what must the expected return on the market be? (do not round intermediate calculations. enter your answer as a percent rounded to 2 decimal places.)

Sagot :

The expected return on the market is 6%.

Define Expected return.

The phrase "expected return" refers to a straightforward probability calculation that is used to ascertain both the potential return and the likelihood that a particular investment will result in a profit. Expected return on investment calculations are done to offer an investor an idea of potential profit vs. risk. The term "expected return" refers to the value of a financial investment's anticipated return. It measures the return, which is the center of the random variable's distribution.

Risk free rate= 3%

Beta= .60

Return on market= 8%

According to CAPM (Capital Asset Pricing Model):

Expected Return = Risk free rate + Beta [Return on market - Risk free rate]

                             = 3 + .60 x (8 - 3)

                              = 6

Expected return on stock = 6%

To know more about Expected return, visit:

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