Question

The stock of Static Corporation has a beta of 1.2. If the expected return on the market increases by 5%, the expected return on Static Corporation should increase by

Answer #1

**Expected return on Static Corporation should increase by
6%**

Beta is the relation of stock's return with market return. | |||||||||||||||

So, | |||||||||||||||

Increase in expected return of Static Corporation | = | Beta of static corporation * Increase in market expected return | |||||||||||||

= | 1.2*5% | ||||||||||||||

= | 6% | ||||||||||||||

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Previous

A particular asset has a beta of 1.2 and an expected return of
10%. The expected return on the market portfolio is 13% and the
risk-free rate is 5%. The asset is:
Select one:
a. under-priced
b. appropriately priced
c. overpriced
d. There is not enough information to answer the question

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