A Stock Has a Beta of 1

question 3

Multiple Choice

A stock has a beta of 1.4 and an expected return of 16%. The risk-free rate is 5%. What is the slope of the Security Market Line?

• A) 7.86%
• B) 7.98%
• C) 8.23%
• D) 8.67%
• E) 8.98%

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Definitions:

Disposable Income

The amount of money an individual or household has to spend or save after income taxes are deducted.

Real GDP

A measure of a country's economic output that accounts for changes in the price level, adjusting for inflation or deflation to reflect the true value of goods and services produced.

Inflation Rate

The rise in the average price level of goods and services within an economy throughout a specific time frame.

Calculating GDP

The process of determining the Gross Domestic Product of a country, usually by adding up total consumer spending, investment, government spending, and net exports.