What rate of return should an investor expect for a stock that has a Beta of 0.8 when the market is expected to yield 14% and Treasury bills offer 6%? A)9.2% B)11.2% C)12.4% D)12.8% r = r_f + B(r_m - r_f) = 6% +.8(14% - 6%) = 6% + 6.4%

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Quizplus · Accepted Answer

The expected rate of return is calculated using the Capital Asset Pricing Model (CAPM): r = 6% + 0.8(14% - 6%) = 6% + 6.4% = 12.4%.

What Rate of Return Should an Investor Expect for a Stock