A stock has an expected return of 14.6 percent, the risk-free rate is 5.7 percent, and the market risk premium is 7.3 percent. What must the beta of this stock be?

Note: Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.

To find the beta (\(\beta\)) of the stock, we use the Capital Asset Pricing Model (CAPM) formula:

\[
E(R_i) = R_f + \beta \cdot (E(R_m) - R_f)
\]

Where:
- \(E(R_i)\) = Expected return of the stock = 14.6% or 0.146
- \(R_f\) = Risk-free rate = 5.7% or 0.057
- \((E(R_m) - R_f)\) = Market risk premium = 7.3% or 0.073

Rearranging to solve for \(\beta\):

\[
\beta = \frac{E(R_i) - R_f}{E(R_m) - R_f}
\]

Substitute the values:

\[
\beta = \frac{0.146 - 0.057}{0.073}
\]

\[
\beta = \frac{0.089}{0.073}
\]

\[
\beta = 1.219
\]

### Final Answer:
\(\beta = 1.219\)

Would you like further clarification or help with another calculation?

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### Related Questions:
1. What does the beta of a stock signify in terms of risk?
2. How does changing the market risk premium affect the beta calculation?
3. If the risk-free rate increases, how does it impact the expected return under CAPM?
4. How can CAPM be used to evaluate the attractiveness of an investment?
5. How does beta affect a portfolio's overall risk?

### Tip:
Always double-check your calculations and ensure units (e.g., percentages vs. decimals) are consistent for accurate results.

A stock has an expected return of 14.6 percent, the risk-free rate is 5.7 percent, and the market risk premium is 7.3 percent. What must the beta of this stock be?

Discover how to calculate the beta of a stock with an expected return of 14.6%, a risk-free rate of 5.7%, and a market risk premium of 7.3% using the Capital Asset Pricing Model (CAPM). Includes step-by-step explanation for finance students.

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