Tot Capital Homework F,com Frognemheproducties Wind S Help Seve Ex 3 The stock in Bowie Enterprestas a bets of 118

Finance Dec 01, 2020

Tot Capital Homework F,com Frognemheproducties Wind S Help Seve Ex 3 The stock in Bowie Enterprestas a bets of 118. The expected return on the market percent and the beere 306 percent Wat is the required return on the company's stock? Multiple Choice

Expert Solution

We can calculate the required rate of return on the stock using the CAPM MODEL

CAPM Model = Rate of return of the stock = Risk free rate + B* (Rate of return of market - risk free rate)

We are given the following info

Beta = 1.18

Return of the market = 11.8%

Risk free rate = 3.06%

Hence we will use these values in the above formula

Rate of return of the stock = Risk free rate + B* (Rate of return of market - risk free rate)

Rate of return = 3.06% + 1.18 * ( 11.8% - 3.06%)

Rate of return = 13.37%

Hence the rate of return on the stock is 13.37%

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