Suppose You Forecast That the Market Index Will Earn a Return

Multiple Choice

Suppose you forecast that the market index will earn a return of 12% in the coming year. Treasury bills are yielding 4%. The unadjusted β of Mobil stock is 1.10. A reasonable forecast of the return on Mobil stock for the coming year is _________ if you use a common method to derive adjusted betas.

A) 15.0%
B) 14.5%
C) 13.0%
D) 12.5%