Calculate the expected return of Lecker Corp. and Eromdit Inc. stocks from the information provided below:?

Question

Calculate the expected return of Lecker Corp. and Eromdit Inc. stocks from the information provided below:

• Eromdit Stock is trading at $15

• Lecker Stock is trading at $6

• Risk free rate is 4.25%

• Beta for Eromdit is 1.45

• Correlation Coefficient between Eromdit and Lecker is 0.75

• Beta for Lecker is 1.75

• Market return is expected to be 10.25%

Answer 1

Expected return for Eromdit is 12.95 percent

Expected return for Lecker is 14.75 percent