alleryStart learning →The risk-free rate is 7 percent and the market return 13 percent. What does CAPM require for a stock with beta 1.5?
A19.5%
B16%
C10%
D13%
Answer & Solution
Correct answer: B. 16%
Required return = 7% + 1.5 x (13% - 7%) = 7% + 9% = 16%.
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