Stock J has a beta of 1.47 and an expected return of 15.8 percent. Stock K has a
ID: 2661248 • Letter: S
Question
Stock J has a beta of 1.47 and an expected return of 15.8 percent. Stock K has a beta of 1.05 and an expected return of 11.9 percent. What is the risk-free rate if these securities both plot on the security market line?2.15 percent
3.34 percent
3.88 percent
4.41 percent
4.68 percent Stock J has a beta of 1.47 and an expected return of 15.8 percent. Stock K has a beta of 1.05 and an expected return of 11.9 percent. What is the risk-free rate if these securities both plot on the security market line? 2.15 percent 3.34 percent 3.88 percent 4.41 percent 4.68 percent
2.15 percent
3.34 percent
3.88 percent
4.41 percent
4.68 percent
Explanation / Answer
15.8% = rf+ 1.47*rm
11.9% = rf+1.05*rm
Solving these two equations
rf= 2.15%
2.15 percent