Suppose the risk-free return is 7

Finance Dec 26, 2020

Suppose the risk-free return is 7.3% and the market portfolio has an expected return of 11.5% and a standard deviation of 16%. Loblaw Companies Limited stock has a beta of 0.28. What is its expected return? The expected return is %. (Enter your response as a percent rounded to two decimal places.)

Expert Solution

Expected return = Risk-free rate + Beta(Market return - Risk-free rate)

Expected return = 0.073 + 0.28(0.115 - 0.073)

Expected return = 0.0848 or 8.48%

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