The risk free rate is 7 the return in the market is 10 and t

The risk free rate is 7%, the return in the market is 10%, and the beta is 1.30. What return must you receive to be satisfied that you are being fairly compensated for the risk of the firm?

please state the formula used in excel and answer

Solution

Solution:

Required Rate of Return = Risk Free Rate + Beta*(Market Return – Risk Free)

=7+1.3(10-7)

=7+1.3(3)

=7+3.9

=10.9%