A Security Has an Expected Rate of Return of 0

question 20

Multiple Choice

A security has an expected rate of return of 0.15 and a beta of 1.25. The market expected rate of return is 0.10, and the risk-free rate is 0.04. The alpha of the stock is

• A) 1.7%.
• B) −1.7%.
• C) 8.3%.
• D) 3.5%.