Carl Is Considering Investing in a Canadian Common Stock with a 16.5

question 3

Multiple Choice

Carl is considering investing in a Canadian common stock with a 16.5% historic annual rate of return. The stock is 25% more risky than the portfolio of Canadian common stocks. Government of Canada t-bills currently yield 4%, and a portfolio of Canadian stock has a risk premium of 6%. What should be Carl's minimum acceptable rate of return if he invests in this stock?

• A) 20.5%
• B) 11.5%
• C) 10.5%
• D) 22.5%

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