## [answered] A stock has a beta of 1.38, the expected return on the mark

A stock has a beta of 1.38, the expected return on the market is 10 percent, and the risk-free rate is 5.0 percent. What must the expected return on this stock be? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Calculation of Expected returns using CAPM model formula:

Expected Return = Risk Free rate + Beta * (Return on market - Risk Free rate)

Hence,

Expected Return = 3.5 + 1.04*(10-3.5) = 10.26%

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This question was answered on: Sep 18, 2020

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