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:

Encourage

To inspire with courage, spirit, or confidence; to stimulate by assistance or approval.

Indirect Approach

A communication strategy that involves conveying a message in a roundabout way rather than directly.

Routine Request

A standard or regular way of asking for something within a business or professional context.

Negative Messages

Communications that convey unfavorable, disappointing, or unwelcome information to the recipient.