a stock with a beta of 1

Finance Aug 31, 2020

a stock with a beta of 1.8 has an expected rate of return of 16%. if the market return this year turns out to be 6 percentage points below expectations. what is the best guess as to the rate of return on the stock??

Expert Solution

The best guess as to the rate of return on the stock is as follows:

=16%-1.8*6%

=16%-10.8%

=0.052

=5.2%

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