A stock has a beta of 1. The pure rate of interest is 2.75 percent and investors require a 3 percent inflation premium.

A stock has a beta of 1.5. The pure rate of interest is 2.75 percent and investors require a 3 percent inflation premium. What is the required rate of return on this stock if the market risk premium is 6 percent? (Hint: First, calculate the risk-free rate using the pure rate and the inflation premium. Next, use this risk-free rate to find the required return on the stock.)

A.13.7%

B.17.4%

C.12.9%

D.16.5%

E.14.8%

F.15.7%