A Company Has a Beta of 4

question 14

Multiple Choice

A company has a beta of 4.5. If the market return is expected to be 14 percent and the risk-free rate is 7 percent, what is the company's risk premium?

• A) 7.0 percent
• B) 25.5 percent
• C) 31.5 percent
• D) 38.5 percent

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Definitions:

Indorses In Blank

A term referring to the endorsement of a negotiable financial instrument without specifying the endorsee, making it payable to the holder.

Negotiation

The process of discussing terms and conditions to reach a mutual agreement in transactions, contracts, or disputes.

Bearer Instrument

A document that entitles the person holding it to ownership or to receive the benefits it confers.

Negotiates

The process of discussing an issue to reach an agreement or compromise between parties.