Consider the CAPM. The risk-free rate is 6%, and the expected return on the market is 18%. What is the expected return on a stock with a beta of 1.3?
A. 6%
B. 15.6%
C. 18%
D. 21.6%
D. 21.6%
E[r s ] = 6% + [18% - 6%](1.3) = 21.6%
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