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Suppose you observe the following situation: Stock Beta Expected Return X 1.50 0.18 Y 2.00 0.23 Assume these securities are correctly priced. Based on the

Suppose you observe the following situation:

Stock Beta Expected Return

X 1.50 0.18

Y 2.00 0.23

Assume these securities are correctly priced. Based on the CAPM, what is the market premium?

A.

7.5 percent
B.

10 percent
C.

11.5 percent
D.

12.5 percent
E.

13 percent

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