Answer:
5.2%
Explanation:
A stock has a beta of 1.8
The expected rate of return is 16%
= 16/100
= 0.16
The market return turns out to be 6% below the expection
The first step is to calculate the decrease in the expected return
= beta× decrease in the market return
= 1.8× 6/100
= 1.8 × 0.06
= 0.108
Therefore the rate of return inn the stock can be calculated as follows
= 0.16-0.108
= 0.052×100
= 5.2%
Hence the rate of return on the stock is 5.2%
