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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Definitions:

NAFTA

The North American Free Trade Agreement, a treaty between Canada, Mexico, and the United States that removed tariff barriers between the nations.

GATT

The General Agreement on Tariffs and Trade, an international treaty that aimed to reduce tariffs and other trade barriers; precursor to the World Trade Organization.

Economists

Experts in the study of economics, focusing on the distribution, consumption, and production of goods and services.

Net Exports

The value of a country's total exports minus its total imports; a positive value indicates a trade surplus, while a negative value indicates a trade deficit.