CFP Certified Financial Planner Test Prep

Category - Foundation

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Suppose the expected return on your treasury stock is 9% and the expected return on your market portfolio is 11%. With a beta coefficient of 1.1, the expected return on stock would be:

13.5%
12.6%
11.5%
10.5%

Explanation

Answer: C - Your expected return on stock would be 11.5%.

R_i = R_f+(R_m – R_f)β_j

R_i = .09+(11-.09)1.1 =11.2%

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