Is there a formula for this question? How would I solve this?
Given a market risk premium of 10% and a risk free rate of 2.75% what is the expected return of Firm X with a beta of 1.25?
Multiple Answers to Choose From:
9.1%12.5%15.3% Solution : Expected return of firm X = Risk free rate + beta * market risk premiumExpected return of firm X = 2.75%+1.25*10%Expected return of firm X15.3%15.30% is the correct answer