Stock M Has a Beta of 1

Multiple Choice

Stock M has a beta of 1.2.The market risk premium is 7.8 percent and the risk-free rate is 3.6 percent.Assume you compile a portfolio equally invested in Stock M,Stock N,and a risk-free security; the portfolio has a beta equal to the overall market.What is the expected return on the portfolio?

A) 11.2 percent
B) 10.8 percent
C) 10.4 percent
D) 11.4 percent
E) 11.7 percent