Problem 8-10

What is the required return on an investment with a beta of 1.3 if the risk-free rate is 1.4 percent and the return on the market is 8.8 percent? Round your answer to two decimal places.

%

If the expected return on the investment is 8.8 percent, what should you do?

Since the expected return is greater than the required return, the individual should make the investment.