Problem:
Neighborhood Stores' stock has a risk premium of 9.6 percent while the inflation rate is 3.1 percent and the risk-free rate is 3.8 percent.
Requirement:
Question: What is the expected return on this stock?
- 12.3 percent
- 12.7 percent
- 13.4 percent
- 13.6 percent
- 16.5 percent
Note: Provide support for your rationale.