Ask Question
29 December, 17:50

Mulherin's stock has a beta of 1.2, its required return is 10%, and the risk-free rate is 4%. What is the required rate of return on the market? (Answer: %, Hint: First, find the market risk premium.)

+2
Answers (1)
  1. 29 December, 18:14
    0
    9%

    Explanation:

    The formula is Ra=Rf + (Rm-Rf) Ba

    Ra=10%

    Ba=1.2

    Rf=4%

    Rm=?

    Ra=Rf + (Rm-Rf) * Ba

    10%=4% + (Rm-4%) * 1.2

    10%=4%+1.2Rm-4.8%

    10%+4.8%=4%+1.2Rm

    14.8%-4%=1.2Rm

    Rm = 10.8%/1.2

    Rm=9%
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Mulherin's stock has a beta of 1.2, its required return is 10%, and the risk-free rate is 4%. What is the required rate of return on the ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers