Answered step by step
Verified Expert Solution
Question
1 Approved Answer
You are analyzing a stock that has a beta of 1 . 2 8 . The risk - free rate is 4 . 6 %
You are analyzing a stock that has a beta of The riskfree rate is and you estimate the market risk premium to be If you expect the stock to have a return of over the next year, should you buy it Why or why not?
The expected return according to the CAPM is
Round to two decimal places.
Should you buy the stock? Select the best choice below.
A No because the expected return based on the beta is greater than the return on the stock.
B Yes, because the expected return based on the beta is equal to or less than the return on the stock.
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