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Investors expect the Market Rate of Return to be 10%…?

The expected rate of return on a stock, with beta of 1.2, is currently 12%. If the market return this year turns out to be 8%, how would you revise your expectation of the rate of return on the stock?
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Dillan Pacocha

Feb 20, 2025

1. Yes, it is 9.6%, on the assumption that the Risk Free Return is 0.0%2. The formula for calculating return is:Expected rate of return = (Risk free return)+Beta{(Market Return)-(Risk free return)}3. Existing: 12% = (0.0%)+1.2{(10%)-(0.0%)}4. Revised: 9.6%= (0.0%)+1.2{(8%)-(0.0%)}... Show More
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