Determine the expected return of a companys stock given a ri

Determine the expected return of a company’s stock given a risk free rate of 7%, an expected market return of 12%, a market risk premium of 5% and a company Beta of 1.5.

A. 0.115

B. 0.125

C. 0.135

D. 0.145

Please show calculations

Solution

expected return of a company’s stock=risk free rate+Beta*Market risk premium

=7+(1.5*5)

which is equal to

=14.5%

=0.145