- CFA Exams
- CFA Exam: Level I 2021
- Study Session 18. Portfolio Management (1)
- Reading 53. Portfolio Risk and Return: Part II
- Subject 2. Pricing of Risk and Computation of Expected Return

###
**CFA Practice Question**

Suppose the Technee Corporation's common stock has a beta of 1.2. If the risk-free rate is 5% and the expected market return is 8%, the expected return for Technee's common stock is ______.

B. 6.0%

C. 8.6%

A. 3.0%

B. 6.0%

C. 8.6%

Correct Answer: C

5 + 1.2(8 - 5) = 8.6%

###
**User Contributed Comments**
3

User |
Comment |
---|---|

mattg |
E(Rstock)=Rf+(E(Rm-Rf) x Beta(stock) |

davcer |
the beta is higher than 1, so the only possible answer is C |

ldfrench |
CAPM |