The Expected Return for Zbrite Stock Calculated Using the CAPM

question 82

Multiple Choice

The expected return for Zbrite stock calculated using the CAPM is 15.5%.The risk free rate is 3.5% and the beta of the stock is 1.2.Calculate the implied market risk premium.

• A) 5.5%
• B) 6.5%
• C) 10.0%
• D) 15.5%
• E) 12.0%

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Definitions:

Capital Intensive

A business process or industry that requires large amounts of money to produce goods or services.

Service Intensive

Describes businesses or industries that are heavily reliant on human labor and personal interaction to deliver their services.

Risk

The potential for loss, damage, or any other negative occurrence that is caused by external or internal vulnerabilities and that may be mitigated through preemptive action.

Frustration

The feeling of upset or annoyance, often due to inability to change or achieve something.