A stock's required rate of return is equal to the risk-free rate plus the stock's ___________.?

Question

A stock's required rate of return is equal to the risk-free rate plus the stock's ___________.?

Answer 1

risk premium

Answer 2

The Capital Asset Pricing Model is an important tool for analyzing the relationship between risk and rates of return.  The model is based on the proposition that any stock’s required rate of return is equal to the risk-free rate of return plus a risk premium, which reflects only the risk remaining after diversification.  Its primary conclusion is: The relevant riskiness of an individual stock is its contribution to the riskiness of a well-diversified portfolio.