The stock of Martin Industries has a beta of 1.60. The risk-free rate of return is 3.0 percent and the market risk premium is 8 percent. What is the expected rate of return on Martin Industries stock?

(A) 11.0 percent

(B) 14.1 percent

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(C) 16.5 percent

(D) 15.8 percent

(E) 16.0 percent

24. The linear relation between an asset’s expected return and its beta coefficient is the:

(A) reward-to-risk ratio.

(B) portfolio weight.

(C) portfolio risk.

(D) security market line.

(E) market risk premium.

25. A portfolio contains two assets. The first asset comprises 60% of the portfolio and has a beta of 1.0. The other asset has a beta of 1.8. The portfolio beta is

(A) 1.35

(B) 1.38

(C) 1.32

(D) 1.40

(E) 1.50

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