CAP Inc'S Stock Is Trading at $40

question 8

Multiple Choice

CAP Inc.'s stock is trading at $40.Its beta in the capital asset pricing model (CAPM) is 1.3.The one-year risk-free rate of interest is 2% and the equity premium for one year is assumed to be 6%,both in simple terms.The stock pays no dividends.Use simple interest for compounding.The one-year forward price of CAP's stock is:

• A)$40.80
• B)$42.40
• C)$43.20
• D)$43.92

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