The Historical Returns for the Past Three Years for Stock

question 39

Multiple Choice

The historical returns for the past three years for Stock B and the stock market portfolio are Stock B: 24 percent, 0 percent, 24 percent; market portfolio: 10 percent, 12 percent, 20 percent. If the risk-free rate is 4 percent, calculate the market risk premium.

• A)18.1 percent
• B)14.0 percent
• C)10.0 percent
• D)6.0 percent

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Definitions:

Transcontinental Railroad

A continuous rail line that connects the east and west coasts of the United States, completed in 1869, facilitating mass migration, goods transportation, and economic development.

Homestead Act

A United States federal law enacted in 1862 that granted 160 acres of public land to settlers for a small fee, assuming they would improve the land by building a dwelling and cultivating crops.

160 Acre Parcels

A reference to the Homestead Act of 1862 in the United States, which allowed settlers to claim 160 acres of public land in exchange for cultivating it for five years.

Improved

Describes something that has been made better or enhanced in quality, performance, or efficiency.