Question

suppose the risk free rate is 4.5% and the expected rate of return to the market is 11.9%. if the stock xyz's beta is 0.9, what is the expected rate of return to the stock? answer to the nearest hundredth of a percent as in xx.xx% and enter without the percent sign.

Answer 1

Risk free rate = 4.5%

Expected market return = 12.8%

beta = 1

Solution :-

Expected rate of return = risk free rate + beta (expected market return - risk free rate)

= 4.5% + 1 (12.8% - 4.5%)

= 4.5% + 1 (8.3%)

= 4.5% + 8.3% = 12.80%

The risk-free rate represents the interest an investor would expect from an absolutely risk-free investment over a specified period of time. The so-called "real" risk-free rate can be calculated by subtracting the current inflation rate from the yield of the Treasury bond matching your investment duration.

The risk-free price of go back is the least rate of return earned by an investor from an investor who holds zero risks. this is a theoretical idea made by some experts because, in practice, there's no such investment that does not comes with zero risks.

Learn more about Risk free here: https://brainly.com/question/26113005

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