Use the Table for the Question(s)below

question 22

Multiple Choice

Use the table for the question(s) below.
-Suppose a risky security pays an average cash flow of $100 in one year.The risk-free rate is 5%,and the expected return on the market index is 13%.If the returns on this security are high when the economy is strong and low when the economy is weak,but the returns vary by only half as much as the market index,what risk premium is appropriate for this security?

• A)4%
• B)6.5%
• C)9%
• D)11%

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Definitions:

Intrapreneur

An employee within an organization who is given the freedom and financial support to create new products, services, systems, or business models as if they were an entrepreneur.

Scarce Resources

Assets, materials, or commodities that are limited in availability and are considered valuable due to their rarity.

Economics

the social science that studies how goods and services are produced, distributed, and consumed.

Wealth Distribution

Wealth distribution describes how wealth is spread across different individuals or groups within a society, often highlighting disparities between rich and poor.