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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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