Consider the Single-Index Model

question 23

Multiple Choice

Consider the single-index model. The alpha of a stock is 2%. The return on the market index is 16%. The risk-free rate of return is 5%. The stock earns a return that exceeds the risk-free rate by 11%, and there are no firm-specific events affecting the stock performance. The β of the stock is

• A) 0.67.
• B) 0.75.
• C) 0.82.
• D) 1.33.
• E) 1.50.

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Definitions:

Jointly

In cooperation or shared between two or more parties.

Severally

Individually or separately; taking responsibility or acting apart from others.

Provincial Legislation

Laws that are enacted by the legislative assemblies of provinces in a country, thus varying between provinces based on local needs and conditions.

Express Agreement

A contract where the terms are clearly stated and verbally or in writing agreed upon by all parties.