The expected market return is 16 percent.The risk-free rate of return is 7 percent,and BC Co.has a beta of 1.1.BC's required rate of return is:
A)17.6 percent.
B)16.0 percent.
C)16.9 percent.
D)23.0 percent.

Question

Quizplus · Accepted Answer

Using the Capital Asset Pricing Model (CAPM):
Required Rate of Return = Risk-free Rate + Beta * (Expected Market Return - Risk-free Rate)
= 7% + 1.1*(16% - 7%)
= 16.9%

Therefore, the answer is (C) 16.9%.

The Expected Market Return Is 16 Percent