Explanation:
Expected return on the stock = Risk-free rate + Beta(Market risk - Risk-free rate)
11.8% = 3% + β × (14% − 3%)
β = = 0.8
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Q.98 Malala Pham is an equity analyst. She has been asked to derive the beta of a stock from the CAPM. What is the value of the beta if the risk-free rate is 3%, the expected return of the market is 14%, and the return on the stock is 11.8%?
A
0.63
B
1.5
C
0.8
D
1.07
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