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Investors expect the market rate of return this year to be 14%. The expected rate of return on a stock with a?
Investors expect the market rate of return this year to be 14%. The expected rate of return on a stock with a beta of 1.4 is currently 18%.
Required:
If the market return this year turns out to be 11%, how would you revise your expectation of the rate of return on the stock?
2 Answers
- jeff410Lv 71 decade agoFavorite Answer
The expected return on the stock goes down assuming the risk free rate stays the same.
- siegLv 45 years ago
between the folk gave you the wonderful answer. You do could have a threat loose fee (that's a t-bill). even with the undeniable fact that, his formula isn't somewhat precise. He has the wonderful variables yet by using order of operations, he's erroneous. it quite is r/f+(r/m-r/f)beta=estimated return.
