Asset a Has an Expected Return of 22% and a Beta

question 263

Multiple Choice

Asset A has an expected return of 22% and a beta of 1.8. The expected market return is 14%. What is the risk-free rate?

• A) 0.6%
• B) 1.2%
• C) 3.0%
• D) 4.0%
• E) 6.0%

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Definitions:

Price Lowered

A reduction in the cost of goods or services.

Total Revenue

The total amount of money a firm receives from sales of its products or services before any expenses are subtracted.

Demand

The total quantity of a good or service that consumers are willing and able to purchase at various price levels at a given time period.

Unit Elastic

A demand or supply situation where a percentage change in price results in an equal percentage change in the quantity demanded or supplied.