A stock has a beta of 1. The pure rate of interest is 3.25 percent and investors require a 3 percent inflation premium.

A stock has a beta of 1.7. The pure rate of interest is 3.25 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? 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

16.5%

13.7%

12.9%

17.4%

14.8%

15.7%