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      Question

      Risk free rate are 8% and the expected market return is

      12%. What is the expected rate of return of a stock having beta 1.2.
      A 24% Correct Answer Incorrect Answer
      B 4.8% Correct Answer Incorrect Answer
      C 22.4% Correct Answer Incorrect Answer
      D 21.6% Correct Answer Incorrect Answer
      E 15.2% Correct Answer Incorrect Answer

      Solution

      As per CAPM (Capital Asset Pricing Model) Expected Return = Risk Free return + Beta (Expected market return- Risk Free return) = 8% + 1.2 (12%-8%) = 8% + 7.2% = 15.2%

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