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16 September, 19:33

Pasteur Inc. (PI) common stock has a beta of 1.2. If the expected return on the average stock is 12 percent and the risk-free rate is 6 percent, what is the required rate of return for PI

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  1. 16 September, 19:48
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    13.2%

    Explanation:

    required return Ra=?

    market return Rm=12%

    Beta of stock Ba=1.2

    Risk free return Rf=6%

    Formula;

    Ra=Rf + (Rm-Rf) * Ba

    Ra=.06 + (.12-.06) * 1.2

    Ra=13.2%
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