Styles Corporation has a current stock price of $24 and has consistently provided a $3 dividend. If the expected stock market return is 15% and the risk free rate is 4%, determine the company's Beta.

Question

Quizplus · Accepted Answer

The correct answer is A because Beta can be calculated using the formula: Beta = (Expected Stock Return - Risk-Free Rate) / (Market Risk Premium). In this case, the expected stock return is $3 / $24 + 4% = 19%, the risk-free rate is 4%, and the market risk premium is 15% - 4% = 11%. Therefore, Beta = (19% - 4%) / 11% = .77.

Styles Corporation Has a Current Stock Price of $24 and Has