Answered step by step
Verified Expert Solution
Question
1 Approved Answer
A stock has a beta of 1.5. The pure rate of interest is 2.75 percent and investors require a 3 percent inflation premium. What is
A stock has a beta of 1.5. The pure rate of interest is 2.75 percent and investors require a 3 percent inflation premium. What is the required rate of return on this stock if the market risk premium is 6 percent? (Hint: First, calculate the risk-free rate using the pure rate and the inflation premium. Next, use this risk-free rate to find the required return on the stock.)
- A.15.7%
- B.17.4%
- C.13.7%
- D.14.8%
- E.12.9%
- F.16.5%
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started