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SML Equation - Required Rate of Return

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Millar Motors has a beta of 1.30 and an expected dividend growth rate of 5.00% per year. The T-bill rate is 3.00%, and the T-bond rate is 6.00%. The annual return on the stock market during the past 3 years was 15.00%. Investors expect the annual future stock market return to be 12.00%. Using the SML, what is Millar's required return?
12.5%
12.8%
13.1%
13.5%
13.8%

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Solution Summary

The solution computes using the SML, Millar's required return.

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SML Equation

Required Return on Stock = Risk free rate + ...

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