Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Stock R's beta = 1.5 Stock S's beta = 0.75 Consider that the required return on an average stock is 14 percent. The risk-free rate
Stock R's beta = | 1.5 | ||||
Stock S's beta = | 0.75 | ||||
Consider that the required return on an average stock is 14 percent. The risk-free rate of return is 6 percent. If this is so, the required return on the riskier stock exceeds the required return on the less risky stock by how much? | |||||
= 6% + 1.5*(14-6) | 12.06 | ||||
= 6% + 0.75*(14-6) | 6.06 | ||||
Diff. in required return(s) | 6.00 | ||||
Is this correct? |
|
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