Fiske Roofing Supplies' stock has a beta of 1.23, its required return is 11.75%, and the risk-free rate is 4.30%. What is the required rate of return on the market? (Hint: First find the market risk premium.) Select one:

a. 10.36%

b. 10.62%

c. 10.88%

d. 11.15%

e. 11.43%

Question

Business

Trevin Everett

30 May, 04:43

Fiske Roofing Supplies' stock has a beta of 1.23, its required return is 11.75%, and the risk-free rate is 4.30%. What is the required rate of return on the market? (Hint: First find the market risk premium.) Select one:

a. 10.36%

b. 10.62%

c. 10.88%

d. 11.15%

e. 11.43%

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Answers (1)

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Beautiful · Answer 1

ER (P) = Rf + β (Rm - Rf)

11.75 = 4.30 + 1.23 (Rm - Rf)

11.75 - 4.30 = 1.23Rm - 5.289

7.45 + 5.289 = 1.23Rm

12.739 = 1.23Rm

Rm = 12.739/1.23

Rm = 10.36%

Explanation: The expected return of a stock is a function of risk-free rate plus market risk premium. Market risk premium is equal to beta multiplied by risk premium. Risk premium is market return minus risk free rate.

Fiske Roofing Supplies' stock has a beta of 1.23, its required return is 11.75%, and the risk-free rate is 4.30%. What is the required rate of return on the market? (Hint: First find the market risk premium.) Select one:a. 10.36%b. 10.62%c. 10.88%d. 11.15%e. 11.43%

Fiske Roofing Supplies' stock has a beta of 1.23, its required return is 11.75%, and the risk-free rate is 4.30%. What is the required rate of return on the market? (Hint: First find the market risk premium.) Select one:

a. 10.36%

b. 10.62%

c. 10.88%

d. 11.15%

e. 11.43%