Which one of the following stocks is correctly priced according to CAPM if the risk-free rate of return is 3.4 percent and the market risk premium is 7.4 percent? $\begin{array}{ccc}
&& \text { Expected } \
\text { Stock } & \text { Beta } & \text { Retumn } \
\mathrm{A} & .87 & .096 \
\mathrm{~B} & 1.09 & .102 \
\mathrm{C} & 1.62 & .146 \
\mathrm{D} & .98 & .107 \
\mathrm{~F} & 1.16 &. 139
\end{array}$

Question

Quizplus · Accepted Answer

The correct answer is D because the expected return for stock D is 10.7%, which is equal to the risk-free rate of return (3.4%) plus the market risk premium (7.4%) multiplied by the stock's beta (0.98).

Which One of the Following Stocks Is Correctly Priced According