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Calculating expected market retun & return on a stock

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Assume that the risk-free rate is 5% and the market risk premium is 6%. What is the expected return for the overall stock market? What is the required rate of return on a stock that has a beta of 1.2?

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Solution Summary

Solution describes the methodology to calculate expected market return and required rate of return on a stock.

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Expected return for overall stock market=risk free rate+ market risk premium
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  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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