Shares in a Company Are Perfectly Correlated with the Market

question 12

Multiple Choice

Shares in a company are perfectly correlated with the market return. The risk free rate of return is 5 per cent and the risk premium is 6 per cent. What is the expected return?

• A) 30%
• B) 11%
• C) 1%
• D) 1.2%

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Definitions:

Principle of Justice

A fundamental moral guideline for ensuring fairness and equitable treatment of individuals within society.

Sales Pressure

The stress or tension that arises from attempting to persuade customers to purchase a product or service within certain time limits or under challenging conditions.

Employee Rights

Rights desired by employees regarding their job security and the treatment administered by their employers while on the job, irrespective of whether those rights are currently protected by law or collective bargaining agreements of labor unions.

House Account

A term used in sales and customer service referring to accounts that are directly managed by the company, often requiring special attention or services.