Using the Formula for the Security Market Line (Formula 21-7)

question 5

Multiple Choice

Using the formula for the security market line (Formula 21-7) , if the risk-free rate (R_F) is 6%, the market rate of return (K_M) is 12%, and the beta (b_i) is 1.2, compute the anticipated return for stock i (K_i) .

• A)20.4%
• B)16.33%
• C)13.64%
• D)13.4%
• E)13.2%

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