The expected return on GreatBiz stock is 14 percent while the expected return on the market is 12 percent. The stock's beta is 1.43. What is the risk-free rate of return? 1 điểm A) 1.22% B) 5.31% C) 7.35% D) 5.50% E) 4.13%

The risk-free rate of return can be calculated using the Capital Asset Pricing Model (CAPM) formula:

Expected Return = Risk-Free Rate + Beta * (Market Return - Risk-Free Rate)

Given that the expected return on GreatBiz stock is 14 percent, the expected return on the market is 12 percent, and the stock's beta is 1.43, we can substitute these values into the CAPM formula:

14% = Risk-Free Rate + 1.43 * (12% - Risk-Free Rate)

Simplifying the equation:

14% = Risk-Free Rate + 17.16% - 1.43 * Risk-Free Rate

Rearranging the terms:

14% - 17.16% = 0.57 * Risk-Free Rate

-3.16% = 0.57 * Risk-Free Rate

Dividing both sides by 0.57:

Risk-Free Rate = -3.16% / 0.57 ≈ -5.54%

Since the risk-free rate cannot be negative, we can conclude that the correct answer is not listed.