If we assume a market risk premium of 8%, and, an expected return on the S & P 5

Question

If we assume a market risk premium of 8%, and, an expected return on the S & P 500 of 12% what would be the required rate of return for Apple if the 10-year Treasury Note is 4%? a. 16.92% b. 16.275% c. 15.6% d. 12% e. 9.8%

Apple Inc. (AAPL) Nasda Gs-NasdagGS Real Time Price. Currency in USD Add to watchlist 140.94 +0.30 (+0.21%) As of 1 49PM EDT.Manat open. Summary Conversations Statistics Profie Financials Options Holders Histonca‘ Data Analysts 39448 1D5MM YTD TY 2Y SY 10Y Minteractive char Previous Close Open Bid Ask Day's Range 52 Week Range 89.47-142.80 140.64 Market Cap 139.39 Beta 1.45 42 00 PE Ratio TTM) 141.07 x 14500 141.08×1000 EPSmM) 138.62-141.22 Eamings Date 16.92 8.33 Apr 24, 2017Apr 28, 2017 2.28 (1.62%) /A Dvidend & 139.00 Yield Date ly Target Est 15,546,625 138 00 00PE g 'blame 27,163,837

Explanation / Answer

Hence, correct option is (c) 15.6%

Required Return (r) Rf+×Rp Here, Risk free rate of return (Rf) 4.00% Beta of the stock ()                 1.45 Market risk premium (Rp) 8.00% Required Return (r) 15.6% 4%+1.45*8%

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