Expected return for the overall stock market


Problem:

Assume that the risk-free rate is 5% and the market risk premium is 6%.

Required:

Question 1: What is the expected return for the overall stock market?

Question 2: What is the required rate of return on a stock with a beta of 1.2?

Note: Show all workings.

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Accounting Basics: Expected return for the overall stock market
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