Dee's Fashions has a growth rate of 3.2 percent and is equally as risky as the market while its stock is currently selling for $32 a share. The overall stock market has a return of 10.9 percent and a risk premium of 6.8 percent. What is the expected rate of return on this stock?
A) 10.0 percent
B) 9.2 percent
C) 10.9 percent
D) 11.3 percent
E) 11.7 percent

Question

Quizplus · Accepted Answer

Since Dee's Fashions is equally as risky as the market, its expected rate of return would match the overall stock market's return, which is 10.9 percent.

Dee's Fashions Has a Growth Rate of 3