You Own $5,000 of Software Corp's Stock That Has a Beta

question 39

Multiple Choice

You own $5,000 of Software Corp's stock that has a beta of 3.75. You also own $10,000 of Home Improvement Corp. (beta = 1.5) and $15,000 of Publishing Corp. (beta = 0.35) . Assume that the market return will be 13 percent and the risk-free rate is 4.5 percent. What is the risk premium of the portfolio?

• A) 11.05 percent
• B) 16.50 percent
• C) 17.00 percent
• D) 24.70 percent

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Definitions:

Social Readjustment Rating Scale

A scale that measures the amount of stress in one's life over a certain period of time based on the occurrence of various life events, each given a different weight.

Perceptions

The process of organizing and interpreting sensory information to understand the environment and events.

Stress

A physical or psychological response to internal or external pressures, perceived as challenges or threats to well-being.

Hans Selye

A pioneering endocrinologist known for his research on the effects of stress on the human body and for defining the "General Adaptation Syndrome."