The stock of Billingsley United has a beta of 0.92. The market risk premium is 8.4 percent and the risk-free rate is 3.2 percent. What is the expected return on this stock?
A) 8.87 percent
B) 9.69 percent
C) 10.93 percent
D) 11.52 percent
E) 12.01 percent

Question

Quizplus · Accepted Answer

The expected return on the stock can be calculated using the Capital Asset Pricing Model (CAPM): Expected Return = Risk-Free Rate + Beta * Market Risk Premium. Substituting the given values: 3.2% + 0.92 * 8.4% = 10.93%.

The Stock of Billingsley United Has a Beta of 0