The stock in Bowie Enterprises has a beta of .89. The expected return on the market is 11.90 percent and the risk-free rate is 2.93 percent. What is the required return on the company's stock?a. 10.91%b. 13.52%c. 10.31%d. 10.61%e. 12.22%
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Ответ:
a. 10.91%
Explanation:
The computation of the required return on the company stock is shown below:
As per CAPM, the required return is
= Risk free rate of return + Beta × (Market rate of return - risk free rate of return)
= 2.93% + 0.89 × (11.90% - 2.93%)
= 2.93% + 0.89 × 8.97
= 10.91%
Hence, the required return on the company's stock is 10.91%
Therefore the correct option is a.
Ответ: