What rate of return should an investor expect for a stock that has a beta of 1.25 when the market is expected to yield 14% and Treasury bills offer 6%?
A) 10.0%
B) 11.2%
C) 12.4%
D) 16.0%

Question

Quizplus · Accepted Answer

The expected rate of return can be calculated using the Capital Asset Pricing Model (CAPM): Expected Return = Risk-Free Rate + Beta * (Market Return - Risk-Free Rate). Substituting the given values: 6% + 1.25 * (14% - 6%) = 16%.

What Rate of Return Should an Investor Expect for a Stock