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:

Continuous

Without interruption or end, often used to describe processes or events that persist over time without stopping.

Cephalocaudal

A principle of growth and development where development proceeds from the head downwards through the body.

Proximodistal

A pattern of growth and development where development proceeds from the center of the body outward towards the extremities.

Infant's Head

The upper part of a baby's body that contains the brain, eyes, ears, nose, and mouth, crucial for early sensory and cognitive development.