The Historical Returns for the Past Four Years for Stock

Multiple Choice

The historical returns for the past four years for Stock C and the stock market portfolio are Stock C: 10 percent, 30 percent, 20 percent, 20 percent; market portfolio: 5 percent, 15 percent, 25 percent, 15 percent. If the risk-free rate of return is 5 percent and the expected market return is 12 percent, calculate the required rate of return on Stock C using the CAPM.

A) 5.0 percent
B) 10.0 percent
C) 8.5 percent
D) 13.0 percent