CAP Inc'S Stock Is Trading at $40

Multiple Choice

CAP Inc.'s stock is trading at $40. Its beta in the capital asset pricing model (CAPM) is 1.3. The one-year risk-free rate of interest is 2% and the equity premium for one year is assumed to be 6%, both in simple terms. The stock pays no dividends. Use simple interest for compounding. The one-year forward price of CAP's stock is:

A) $40.80
B) $42.40
C) $43.20
D) $43.92