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Using the Formula for the Security Market Line (Formula 21-7)

Question 5

Multiple Choice

Using the formula for the security market line (Formula 21-7) , if the risk-free rate (RF) is 6%, the market rate of return (KM) is 12%, and the beta (bi) is 1.2, compute the anticipated return for stock i (Ki) .


A) 20.4%
B) 16.33%
C) 13.64%
D) 13.4%
E) 13.2%

Correct Answer:

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