Cooley Company's stock has a beta of 1.40,the risk-free rate is 4.25%,and the market risk premium is 5.50%.What is the firm's required rate of return?
A)11.36%
B)11.65%
C)11.95%
D)12.25%
E)12.55%

Question

Quizplus · Accepted Answer

First, we calculate the required rate of return using the CAPM model: R = Rf + beta*(Rm - Rf), where Rf = 4.25%, beta = 1.40, and Rm - Rf = 5.50%. Plugging in the values, we get:
R = 4.25% + 1.40*5.50%
R = 11.95%
Therefore, the firm's required rate of return is 11.95%. The closest option is C, which is the correct answer.

Cooley Company's Stock Has a Beta of 1