The Franko Company has a beta of 1.09. By what percent will the rate of return on the stock of Franko Company increase if the market rate of return rises by 3%?
A) 1.91%
B) 2.75%
C) 3.27%
D) 4.09%

Question

Quizplus · Accepted Answer

The percentage increase in the rate of return on Franko Company's stock can be calculated using the following formula:

% Change in ROR = Beta x % Change in Market ROR

Substituting the given values, we get:

% Change in ROR = 1.09 x 3% = 3.27%

Therefore, the rate of return on Franko Company's stock will increase by 3.27% if the market rate of return rises by 3%.

The Franko Company Has a Beta of 1