Investment Required Return Calculation

If the risk-free rate is 5.8 percent and the risk premium is 6.6 percent, what is the required return? (Round your answer to 1 decimal place.)

a. 12.4% Final answer:Correct option: a. 12.4%.

Answer:

To find the required return on an investment, you add the risk-free rate (5.8%) to the risk premium (6.6%), resulting in a required return of 12.4%.

Explanation:

To calculate the required return on an investment, we add the risk-free rate to the risk premium. In this case, the risk-free rate is given as 5.8 percent, and the risk premium is 6.6 percent.

The formula to calculate the required return is:
Required Return = Risk-Free Rate + Risk Premium

Plugging in the given values:
Required Return = 5.8% + 6.6%
= 12.4%

Therefore, the required return on the investment would be 12.4 percent.