# Required Rate of Return - Formula

The market has an expected return of 10% and the risk-free rate is 4%.

Based on the security market line implied by this information,

which of the following securities are correctly priced and which are over/underpriced?

Beta Actual Return

Stock 1 0.60 7.00%

Stock 2 1.00 11.00%

Stock 3 1.30 12.00%

Stock 4 1.70 19.00%

https://brainmass.com/business/beta-and-required-return-of-a-project/required-rate-of-return-formula-311338

#### Solution Preview

Required return = risk free rate + Beta* (Market rate - risk free rate)

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#### Solution Summary

The solution computes Required Rate of Return by given appropriate formula.

$2.19