Ask Question
21 August, 06:23

2. What is the risk premium for a stock where the risk free rate is 5.1%; the equity market risk premium is 5.0%; and the beta of the stock is 1.2.?

+4
Answers (1)
  1. 21 August, 09:35
    0
    6%

    Explanation:

    First we have to the calculate the expected return on the stock using capital asset pricing model which is as follow:

    Expected return=Risk free return+Beta*Market risk premium

    Expected return=5.1%+1.2*5%=11.1%

    Now we have to calculate the risk premium by taking difference between the expected return and the risk free return.

    Risk premium=Expected return-Risk free return

    =11.1%-5.1%=6%
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “2. What is the risk premium for a stock where the risk free rate is 5.1%; the equity market risk premium is 5.0%; and the beta of the stock ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers