Investors expect the market rate of return this year to be 1

Investors expect the market rate of return this year to be 13%. A stock with a beta of .9 has an expected rate of return of 10%. If the market return this year turns out to be 8%, what is the rate of return on the stock?

Solution

Solution:

The expected return of stock = Beta * expected market return

Beta = 0.9

Expected Market Return = 10 *%

expected return of stock = 0.9 * 10 % = 9 %