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Actual vs expect return on stocks

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Do you think that the actual return on each stock for this period will be the same as the expected return (calculated as risk-free rate + market risk premium x beta)? Why or why not?

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Solution Summary

Your response is 334 words and describes how each of the three ingredients in expected return influences the actual returns.

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Do you think that the actual return on each stock for this period will be the same as the expected return (calculated as risk-free rate + market risk premium x beta)? Why or why not?

No, I do not think the actual return will be the same as the expected (required) return? Why? Because any of these moving parts can change! First, the risk-free rate can change because we are issuing so many treasuries and we depend on foreign investors to buy a great deal of them. If the foreign ...

Solution provided by:
Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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