Assume a one-factor model where the factor is associated with the overall market.Suppose JSC's common stock has a factor beta of .8,the risk-free rate is 3.2 percent,and the expected market rate of return is 11.2 percent.What is the expected return for JSC stock?
A)10.25 percent
B)6.40 percent
C)7.20 percent
D)9.60 percent
E)12.16 percent

Question

Quizplus · Accepted Answer

The expected return for JSC stock can be calculated using the Capital Asset Pricing Model (CAPM): Expected Return = Risk-Free Rate + Beta * (Market Return - Risk-Free Rate). Plugging in the values: 3.2% + 0.8 * (11.2% - 3.2%) = 9.6%.

Assume a One-Factor Model Where the Factor Is Associated with the Overall