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msbelize
Apr 10, 2008, 05:52 PM
A company's common stock has a beta of .8. If the expected risk- free return is 7% and the market offers a premium of 8% over the risk-free rate, what is the expected return of the company's common stock?

antila
Nov 17, 2010, 09:28 PM
Rs = Rf + Bs (Rm-Rf)
Rs= 7% + [ .8 *(8%-7%)]
= 7%+ [ .8*1%]
= 7 % + .8%
= 7.8 %