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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Definitions:

Encomienda

A labor system in Spanish America giving settlers the right to tax local Indigenous people or to demand their labor in exchange for protecting them and teaching them Christianity.

Forced Work

Labor that is imposed against the will of individuals, often without adequate compensation or under threatening conditions.