Assume that a security is fairly priced and has an expected rate of return of 0.17.The market expected rate of return is 0.11 and the risk-free rate is 0.04.The beta of the stock is ___.
A)1.25.
B)1.86.
C)1.
D)0.95.
E)none of the above.

Question

Quizplus · Accepted Answer

The correct answer is B because the beta of the stock can be calculated using the formula: beta = (expected rate of return - risk-free rate) / (market expected rate of return - risk-free rate). Plugging in the given values, we get: beta = (0.17 - 0.04) / (0.11 - 0.04) = 1.86.

Assume That a Security Is Fairly Priced and Has an Expected