Question
1) Jerilu Markets has a beta of 1.11. The risk-free rate of return is 2.8 percent and the market rate of return is 9.7 percent.
1) Jerilu Markets has a beta of 1.11. The risk-free rate of return is 2.8 percent and the market rate of return is 9.7 percent. What is the risk premium on this stock? [Note: a stock's total return is equal to the stock risk premium plus the risk-free rate. The stock's risk premium is the market risk premium adjusted for the stock's exposure to market risk].
Stock risk premium = ___%
2) The risk-free rate of return is 3.8 percent and the market risk premium is 6.4 percent. What is the expected rate of return on a stock with a beta of 1.24?
E(R) = ____ %
What is the expected return of a stock with a beta of 2.1?
E(R) = ___%
What is the expected return of a stock with a beta of 0.5?
E(R) = _____%
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