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%