Assume That the Market Is in Equilibrium and That Stock

question 3

Multiple Choice

Assume that the market is in equilibrium and that stock betas can be estimated with historical data.The returns on the market,the returns on United Fund (UF) ,the risk-free rate,and the required return on the United Fund are shown below.Based on this information,what is the required return on the market,r_M? $\begin{array} { l c r } \text { Year } & \text { Market }& { U F } \\ 2008& -9 \% & - 14 \% \\ 2009 & 11 \% & 16\% \\ 2010 & 15 \% & 22\% \\ 2011 & 5 \% & 7 \% \\ 2012 & - 1 \% & -2 \% \end{array}$
$\mathrm { r } _ { \mathrm { RF } : } \mathrm { 7.00 \%}$ $\quad$$\quad$$\quad$ $r _ { \text {United } } : 15.00 \%$

• A) 10.57%
• B) 11.13%
• C) 11.72%
• D) 12.33%
• E) 12.95%

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