?The expected rate of return on a Treasury Bill is 0

Finance Dec 14, 2020

?The expected rate of return on a Treasury Bill is 0.022, the expected rate of return on the Wilshire 5000 is 0.11 and the required rate of return of a stock is 0.11. What is the stocks beta?

Expert Solution

Computation of Stock Beta:

Required Rate of Return = Risk-free Rate + Beta*(Expected Rate of Return on Market - Risk-free Rate)

0.11 = 0.022+Beta*(0.11-0.022)

0.11 - 0.022 = Beta*0.088

0.088 = Beta*0.088

Beta = 0.088/0.088

Beta = 1

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