Question
Asked Nov 24, 2019
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A stock has an expected return of 12 percent, the risk-free rate is 5 percent, and the market risk premium is 7 percent. What must the beta of this stock be? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
 
Beta of stock            

 
 
 
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Expert Answer

Step 1

The beta of stock can be calculated with the help of below expression:

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Step 2

Modify the above expression to calculate beta.

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Step 3

Substitute 5% for risk free return, 12% for expected return ...

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