Tanzlin Manufacturing's common stock has a beta of 1.5.If the expected risk-free return is 9% and the expected return on the market is 14%,what is the expected return on the stock?
A)13.5%
B)21.0%
C)16.5%
D)21.5%

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 Return - Risk-Free Rate). Substituting the given values: 9% + 1.5 * (14% - 9%) = 16.5%.

Tanzlin Manufacturing's Common Stock Has a Beta of 1