The Hold-n-Trade Co. is an all-equity financed firm. The beta is .9,the market risk premium is 7% and the risk-free rate is 5%. What is the expected return of Hold-n-Trade?

Question

Quizplus · Accepted Answer

The expected return of Hold-n-Trade can be calculated using the Capital Asset Pricing Model (CAPM):

Expected Return = Risk-Free Rate + Beta x (Market Risk Premium)

Expected Return = 5% + 0.9 x 7% = 11.3%

Therefore, the correct answer is D) 11.3%.

The Hold-N-Trade Co