Ask Question
25 May, 23:17

Mulherin's stock has a beta of 1.23, its required return is 11.75%, and the risk-free rate is 2.30%. What is the required rate of return on the market? (Hint: First find the market risk premium.) Do not round your intermediate calculations. a. 9.98% b. 7.69% c. 8.19% d. 12.38% e. 10.58%

+4
Answers (1)
  1. 26 May, 02:23
    0
    a. 9.98%

    Explanation:

    The computation of required rate of return is shown below:-

    Required return = Risk - Free rate + Beta * (Market rate - Risk-free rate)

    11.75% = 2.30% + 1.23 * (Market rate - 2.3%)

    (11.75% - 2.30%) : 1.23 = Market rate - 2.3%

    Market rate = (11.75% - 2.30%) : 1.23 + 2.3%

    =9.98%

    Therefore for computing the required rate of return on the market we simply applied the above formula.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Mulherin's stock has a beta of 1.23, its required return is 11.75%, and the risk-free rate is 2.30%. What is the required rate of return on ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers