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If the expected return on XYZ stock is 16.34 percent, the risk-free rate is 2.26 percent, the expected rate of inflation is 1.32 percent, and

If the expected return on XYZ stock is 16.34 percent, the risk-free rate is 2.26 percent, the expected rate of inflation is 1.32 percent, and XYZ stock has a beta of 1.65, then what is the market premium?

a.

8.53% (plus or minus 0.03 percentage points)

b.

9.10% (plus or minus 0.03 percentage points)

c.

10.79% (plus or minus 0.03 percentage points)

d.

6.27% (plus or minus 0.03 percentage points)

e.

None of the above is within 0.03 percentage points of the correct answer

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