You want to find the expected return of a stock. The stock had returns of 7 percent, -18 percent, -5 percent, 16 percent, and 30 percent over the past five years. During this time period, the
stock had a correlation coefficient with its industry of 0.56 and a correlation coefficient with the market of 0.87. The standard deviation of the industry was 27%, and the standard deviation of the market was 12%. The risk-free rate is 3.50% and the market risk premium is 6.50%. What is the expected return of the stock?

Answer rating: 100% (QA)

To calculate the expected return of the stock we need to use the Capital Asset Pricin... View the full answer