Consider the Single-Index Model

question 4

Multiple Choice

Consider the single-index model. The alpha of a stock is 0%. The return on the market index is 10%. The risk-free rate of return is 5%. The stock earns a return that exceeds the risk-free rate by 5%, and there are no firm-specific events affecting the stock performance. The β of the stock is

• A) 0.67.
• B) 0.75.
• C) 1.0.
• D) 1.33.
• E) 1.50.

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