The stock of Martin Industries has a beta of 1.03.The risk-free rate of return is 3.6% and the market risk premium is 9%.What is the expected rate of return on Martin Industries stock?
A)12.9%
B)14.1%
C)16.5%
D)17.4%
E)18.0%

Question

Quizplus · Accepted Answer

The expected rate of return on Martin Industries stock can be calculated using the Capital Asset Pricing Model (CAPM):Expected return = Risk-free rate + Beta * Market risk premium= 3.6% + 1.03 * 9%= 3.6% + 9.27%= 12.9%

The Stock of Martin Industries Has a Beta of 1