A security has a beta of 19 the expected market return is 14

A security has a beta of 1.9, the expected market return is 14%, and the risk-free rate is 4%. What is the expected return on the security? 1) 19% 2) 23% 3) 32% 4) 15%

Solution

Expected return=risk-free rate +Beta*(MArket rate- risk-free rate )

=4+1.9*(14-4)

which is equal to

=23%