The risk-free rate of interest is 2% and the market risk premium is 6%

Finance Oct 20, 2020

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?

Expert Solution

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%

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