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> Is there a formula for calculating required rate of return each stock?stock A (beta 1.2)stock B (beta 0.8)risk free rate
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Is there a formula for calculating required rate of return each stock?stock A (beta 1.2)stock B (beta 0.8)risk free rate
Is there a formula for calculating required rate of return each stock?stock A (beta 1.2)stock B (beta 0.8)risk free rate
Posted at:
2014-12-05
Yes. the Capital Asset Pricing Model "CAPM": E(r) = RFR + ?(Rmkt - RFR)
Stock A: E(r) = 6 + 1.2(10 - 6) = 6 + 4.8 = 10.8%
Stock B: E(r) = 6 + 0.8(10 - 6) = 6 + 3.2 = 9.2%
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