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Determine the beta coefficient for a stock with a return of 10%, risk free rate of 3% and the market return of 9%
Determine the beta coefficient for a stock with a return of 10%, risk free rate of 3% and the market return of 9%.
Expert Solution
Expected return from stock = Risk free rate + Beta x (Market return - Risk free rate)
10% = 3% + Beta x (9% - 3%)
10%= 3% + Beta* 6%
Beta* 6%= 7%
Beta= 7%/ 6%
= 1.17
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