A stock has an expected return of 157 percent the riskfree r

A stock has an expected return of 15.7 percent, the risk-free rate is 6.25 percent, and the market risk premium is 7.6 percent.

Solution

Expected return = R_f + beta (R_m - R_f)

15.7 = 6.25 + beta ( 7.6)

15.7 - 6.25 = beta 7.6

beta = 9.45 / 7.6 = 1.24.