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Homework answers / question archive / The risk-free rate of interest is 2% and the market risk premium is 6%
The risk-free rate of interest is 2% and the market risk premium is 6%. Radon Corporation has a beta of 1.5, and last year generated a return of 13% with a standard deviation of returns of 19%. The required return on Radon Corporation stock is?
Computation of the required return on Radon Corporation stock:-
Required return = Risk free rate + (Beta * Market risk premium)
= 2% + (1.5 * 6%)
= 2% + 9.0%
= 11.0%
