A stock has an expected return of 136 the riskfree rate is 3

A stock has an expected return of 13.6%, the risk-free rate is 3.7%, and the market risk premium is 7.1%. What must the beta of this stock be?

Hi,

Please find the answer as follows:

Use CAPM Model as Below:

Expected Return on the Stock = Risk Free Rate + Beta*(Market Risk Premium)

13.6 = 3.7 + Beta*(7.1)

Beta = (13.6 - 3.7)/7.1 = 1.394 or 1.39

Answer is 1.394 or 1.39.

Thanks.