Assume That the Market Is in Equilibrium and That Stock

question 6

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, rM?
$\begin{array} { l r } \underline { \text { Year } } & \underline {\text { Market }} &\underline { U F } \\ 2011& - 9 \% &- 14 \%\\2012& 11 \% &16 \%\\ 2013 & 15 \%&22 \% \\ 2014 & 5 \% &7 \%\\ 2015 & - 1 \% &- 2 \%\end{array}$

$\mathrm { rgF: } : 7 \mathrm { cde } \%$
rUrited $15.00 \%$

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

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