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21 January, 18:12

Given Required ROR (k) = Rf + Risk Premiumxßi

If a firm's ß is 3, and the market return is 10%, what is the required return on the firm's stock if

the risk-free rate is 5%?

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  1. 21 January, 18:56
    0
    The Required rate of return is 20%

    Explanation:

    As given equation ROR = Rf + risk premium x beta

    Beta = 3

    Rm = 10%

    Rf = 5%

    Risk premium = Rm - Rf

    Risk Premium = 10% - 5%

    Risk Premium = 5%

    Using ROR = Rf + Risk Premium x Beta

    ROR = 5% + 5% x 3

    ROR = 20%
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