(Required rate of return using CAPM)

a. Compute a fair rate of return for Intel common stock, which has a 1.9 beta. The risk-free rate is 8 percent, and the market portfolio (New York Stock Exchange stocks) has an expected return of 14 percent.

b. Why is the rate you computed a fair rate?

a. Using the CAPM, the fair rate of return for Intel common stock is

nothing%. (Round to two decimal places.)

b. Why is the rate you computed in part (a) a fair rate?(Select the best choice below.)

A.The computed 19.4019.40% is a fair rate because it compensates the investor for the time value of money and for assuming risk.

B.The computed 19.4019.40% is a fair rate because it does not compensate the investor for the time value of money and for assuming risk.