The common stock of Flavorful Teas has an expected return of 19.65 percent. The return on the market is 14.5 percent and the risk-free rate of return is 4.2 percent. What is the beta of this stock?

beta= 1.5

Explanation:

The common stock of flavorful tea has an expected return of 19.65%

The return on the market is 14.5%

The risk-free rate is 4.2%

Therefore, the beta of the stock can be calculated as follows

Required return= Risk free rate+beta(market rate-risk free rate)

19.65%= 4.2%+beta(14.5%-4.2%)

19.65%= 4.2% + 14.5beta-4.2beta

19.65%= 4.2% + 10.3beta

19.65%-4.2%= 10.3beta

15.45%= 10.3beta

beta= 15.45/10.3

beta= 1.5

Hence the beta of this stock is 1.5