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Homework answers / question archive / Given the following information, determine the beta coefficient for Stock L that is consistent with equilibrium: = 8%; rRF = 3
Given the following information, determine the beta coefficient for Stock L that is consistent with equilibrium: = 8%; rRF = 3.75%; rM = 8.5%. Round your answer to two decimal places.
Computation of Beta Coefficient of Stock L using CAPM model:
Required Return= Rf+ Beta ( Rm-Rf)
8% = 3.75% + Beta( 8.5%-3.75%)
8%= 3.75% + Beta*4.75%
8%-3.75% = Beta*4.75%
4.25% = Beta*4.75%
Beta = 4.25%/4.75%
Beta = 0.89
Beta Coefficient of Stock L= 0.89
