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23 May, 18:35

A stock has a risk premium of 7.4% and the risk-free rate is 2.1%. What is the stock's fair return? Answer as a percent. Enter only numbers and decimals in your response.

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  1. 23 May, 19:01
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    9.50%

    Explanation:

    The risk free rate is a rate which has no financial loss over a certain period. The risk premium is a rate excess of risk free rate. The risk premium is calculated by subtracting risk free rate from rate of return on an investment.

    The stocks return will = risk free rate + risk premium

    Stock's fair return = 2.1% + 7.4%

    Stock's fair return = 9.50%
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