Daniel's Enterprises Has a Beta of 1

question 26

Multiple Choice

Daniel's Enterprises has a beta of 1.98 and a growth rate of 12 %. The stock is currently selling for $12 a share. The overall stock market has an 11 % rate of return and a risk premium of 8 %. What is the expected rate of return on Daniel's Enterprises stock?

• A) 10.00 %
• B) 15.85 %
• C) 16.67 %
• D) 18.84 %
• E) 19.06 %

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Definitions:

Home Bias

The tendency for investors to prefer investing in domestic over foreign markets, often leading to a lack of diversification in their portfolios.

Overweight Investments

An investment strategy where an investor or portfolio holds a larger percentage of a particular security or sector than the benchmark.

Preferential Treatment

Special privileges or advantages granted to certain investors or stakeholders, often resulting in more favorable financial conditions.

Equity Market Share

A measure of a company's size relative to the industry or market sector in terms of its share of total equity investments.