The common stock of Cross Country Homes has an expected return of 15.18%. The return on the market is 11.6% and the risk-free rate of return is 4.3%. What is the beta of Cross Country Homes
Stock?
A) 1.37
B) 1.42
C) 1.49
D) 1.51
E) 1.56

Question

Quizplus · Accepted Answer

Using the Capital Asset Pricing Model (CAPM):

Expected return on Cross Country Homes = Risk-free rate + Beta * (Market return - Risk-free rate)

15.18% = 4.3% + Beta * (11.6% - 4.3%)

Beta = (15.18% - 4.3%) / (11.6% - 4.3%) = 1.49

Therefore, the answer is C.

The Common Stock of Cross Country Homes Has an Expected