BETA COEFFICIENT Given the following information determine t

BETA COEFFICIENT Given the following information, determine the beta coefficient for Stock L that is consistent with equilibrium: rL = 10%; rRF = 4.95%; rM-12.5%. Round your answer to two decimal places.

Solution

rL =rf+ [beta(rm-rf)]

10 = 4.95 +[beta (12.5 -4.95)]

10-4.95 = [beta * 7.55]

5.05/7.55 =beta

Beta = .67