MNC Corporation has a beta of 2.0.The risk-free rate of interest is 5%,and the return on the stock market overall is expected to be 13%.What is the required rate of return on MNC stock
A) 21%.
B) 41%.
C) 16%.
D) 13%.
E) none of the above

Question

Quizplus · Accepted Answer

The required rate of return can be calculated using the Capital Asset Pricing Model (CAPM) as follows:

Required Rate of Return = Risk-Free Rate + Beta x (Market Return - Risk-Free Rate)
= 5% + 2.0 x (13% - 5%)
= 5% + 16%
= 21%

Therefore, the answer is A) 21%.

MNC Corporation Has a Beta of 2