Carl Is Considering Investing in a Canadian Common Stock with a 16.5

Multiple Choice

Carl is considering investing in a Canadian common stock with a 16.5% historic annual rate of return. The stock is 25% more risky than the portfolio of Canadian common stocks. Government of Canada t-bills currently yield 4%, and a portfolio of Canadian stock has a risk premium of 6%. What should be Carl's minimum acceptable rate of return if he invests in this stock?

A) 20.5%
B) 11.5%
C) 10.5%
D) 22.5%