The Historical Returns Data for the Past Three Years for Stock

question 12

Multiple Choice

The historical returns data for the past three years for Stock B and the stock market portfolio are: Stock B: 24%, 0%, 24%, Market Portfolios: 10%, 12%, 20%. Calculate the required rate of return (cost of equity) for Stock B using CAPM. (The risk-free rate of return
= 4%)

• A) 8.6%
• B) 12.6%
• C) 14.3%
• D) None of the above

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