Cooley Company's stock has a beta of 0.60,the risk-free rate is 2.25%,and the market risk premium is 5.50%.What is the firm's required rate of return? Do not round your intermediate calculations.
A) 5.55%
B) 4.38%
C) 4.66%
D) 6.16%
E) 6.60%

Question

Quizplus · Accepted Answer

The firm's required rate of return can be calculated using the Capital Asset Pricing Model (CAPM) formula: Required Return = Risk-Free Rate + (Beta * Market Risk Premium). Plugging in the given values: Required Return = 2.25% + (0.60 * 5.50%) = 2.25% + 3.30% = 5.55%.

Cooley Company's Stock Has a Beta of 0