Marjen stock has a required return of 20%.The expected market return is 15%,and the beta of Marjen's stock is 1.5.Calculate the risk-free rate.
A)4%
B)5%
C)6%
D)7%

Question

Quizplus · Accepted Answer

Using the CAPM formula: Required return = Risk-free rate + Beta * (Market return - Risk-free rate). Plugging in the values: 20% = Risk-free rate + 1.5 * (15% - Risk-free rate). Solving for the risk-free rate gives 5%.

Marjen Stock Has a Required Return of 20