A stock has an expected return of 9.5 percent, the risk-free rate is 2 percent and the return on the market is 8 percent. What is this stock's beta?
A) 1.50
B) 1.25
C) 1.19
D) 0.94

Question

Quizplus · Accepted Answer

The stock's beta can be calculated using the Capital Asset Pricing Model (CAPM) formula: Expected Return = Risk-Free Rate + Beta * (Market Return - Risk-Free Rate). Plugging in the values: 9.5% = 2% + Beta * (8% - 2%). Solving for Beta gives Beta = 1.25.

A Stock Has an Expected Return of 9