A Stock Has a Beta of 1

question 42

Multiple Choice

A stock has a beta of 1.4. The expected return on the market is 8% and T-bills are yielding 2%. What is the expected return on the stock?

• A) 8.40%
• B) 9.65%
• C) 10.40%
• D) 11.65%
• E) 13.20%

---

Definitions:

Cheap

An adjective describing products or services that are low in price, often implying lower quality or less prestige.

Differential Level Activity

Refers to changes in operating activities that result in differences in costs or revenues under different scenarios or volumes.

Activity-Based Costing

A cost accounting method that assigns overhead and indirect costs to specific activities and objects, improving the accuracy of product and service costing.

Batch Level Activity

Activities and costs associated with processing a batch of units, which occur each time a batch is handled or processed, regardless of the number of units in the batch.