Question: Use the capital-asset pricing model to predict the return next year of a stock with a beta of 1.0, if you expect the return to

Use the capital-asset pricing model to predict the return next year of a stock with a beta of 1.0, if you expect the return to holding stocks to be 8 percent on average, and the interest rate on three-month T-bills will be 3 percent. What is the expected return to this stock?

a. 5.5 percent

b. 2.5 percent

c. 8.0 percent

d. 5.0 percent

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