The Historical Returns for the Past Four Years for Stock

question 33

Multiple Choice

The historical returns for the past four years for Stock C and the stock market portfolio were Stock C: 10 percent, 30 percent, 20 percent, 20 percent; market portfolio: 5 percent, 15 percent, 25 percent, 15 percent.If the risk-free rate of return is 5 percent and the expected market return is 12 percent, calculate the required rate of return on Stock C using the CAPM.

• A)5.0 percent
• B)10.0 percent
• C)8.5 percent
• D)13.0 percent

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Definitions:

Solid Food

Food that is firm to the touch and requires chewing, as opposed to liquid food.

Mashed Foods

Foods that have been crushed or ground into a soft, smooth consistency, commonly prepared for infants or individuals with difficulty chewing.

Bananas

A type of fruit that is elongated and curved, with soft flesh rich in starch covered by a rind, which may be green, yellow, or brown when ripe.

Peas

Small green seeds or the seed-pods of the Pisum sativum plant, commonly eaten as a vegetable.