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Assume that the CAPM is true. Stock 1 has a price of $53 and a beta of 0.7. The stock is expected to pay an

Assume that the CAPM is true. Stock 1 has a price of $53 and a beta of 0.7. The stock is expected to pay an annual dividend of $1.35 one year from now. Stock 2 has a beta of 1 and its expected return is 7.1%. Stock 3 has a beta of 1.5 and its expected return is 8.8%. What is the risk-free rate?

A. 2.5% B. 3.7% C. 4.9% D. 5.2%

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