KMW Inc Has an Estimated Beta of 1

question 52

Multiple Choice

KMW Inc. has an estimated beta of 1.45. Given a forecasted market return of 12% and a T-bill rate 3%, using the index model and the adjusted beta, what is the forecasted return?

• A) 14.7%
• B) 15.2%
• C) 16.2%
• D) 17.8%

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Definitions:

Expected Value

The calculated average of all possible outcomes of a random variable, weighted by their probabilities.

Uncertain Income

Income that is not guaranteed and can fluctuate due to various factors such as business cycles, seasonal work, or freelancing.

Probability

The measure of the likelihood that an event will occur, expressed as a number between 0 and 1 where 1 indicates certainty.

Random Variable

A variable with an uncertain future value.