Hastings Entertainment has a beta of 1.24. If the market return is expected to be 10 percent and the risk-free rate is 4 percent, what is Hastings' required return?
A) 11.44 percent
B) 12.44 percent
C) 14.96 percent
D) 16.40 percent

Question

Quizplus · Accepted Answer

The correct answer is A.The required return for Hastings Entertainment can be calculated using the Capital Asset Pricing Model (CAPM):Required return = Risk-free rate + Beta * (Market return - Risk-free rate)= 4% + 1.24 * (10% - 4%)= 4% + 1.24 * 6%= 4% + 7.44%= 11.44%

Hastings Entertainment Has a Beta of 1