The market has an expected return of 11 percent and a variance of .0093. The T-bill rate is 2 percent. Stock A has a variance of .0203. The covariance of Stock A with the market is .0137. What is the expected return of Stock A?
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In this case, the market has an expected return of 11 percent and the risk-free rate is 2 percent. Therefore, the market risk premium is 11% - 2% = 9%. Show more…
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