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Suppose Carz common stock has a market factor beta of .9, the risk-free rate is 3.5 percent, inflation is expected to be 2.6 percent, and

Suppose Carz common stock has a market factor beta of .9, the risk-free rate is 3.5 percent, inflation is expected to be 2.6 percent, and the expected market risk premium is 7.2 percent. What is the expected return based on the one-factor arbitrage pricing model?

a.

13.05%
b.

9.98%
c.

7.72 %
d.

12.32%
e.

12.58%

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