Bass Clef Music Stores' stock has a risk premium of 7 percent while the inflation rate is 1.9 percent and the risk-free rate is 2.2 percent. What is the expected return on this stock?

expected return on this stock is 9.2 percent

Explanation:

given data

risk premium = 7 percent

inflation rate = 1.9 percent

risk-free rate = 2.2 percent

to find out

expected return on this stock

solution

we know that expected return on this stock formula that is express as here

expected return on this stock = Risk free rate + Risk premium ... 1

put here value we get Expected return

Expected return = 2.2 percent + 7 percent

Expected return = 9.2 percent

so expected return on this stock is 9.2 percent