If a Portfolio Had a Return of 18%, the Risk-Free

question 27

Multiple Choice

If a portfolio had a return of 18%, the risk-free asset return was 5%, and the standard deviation of the portfolio's excess returns was 34%, the risk premium would be

• A) 13%.
• B) 18%.
• C) 49%.
• D) 12%.
• E) 29%.

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Definitions:

Consolidated Income Statement

A income statement that combines the financial performance of all subsidiaries with the parent company, eliminating intercompany transactions.

Income Tax Rate

The proportion of income that is taken from a person or business in the form of taxes.

Consolidated Retained Earnings

The portion of earnings not distributed as dividends but retained by the parent company and its subsidiaries for reinvestment.

Intercompany Sales

Transactions of goods and services between subsidiaries within the same parent company, requiring elimination during consolidation for accurate financial statements.