A Stock Has a Beta of 0

question 16

Multiple Choice

A stock has a beta of 0.95, the expected return on the market is 13.25, and the risk-free rate is 3.66.What must the expected return on this stock be?

• A)10.59 percent
• B) 39.02 percent
• C)14.26 percent
• D)19.86 percent
• E)12.77 percent

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Definitions:

Standard Deviation

A statistic that measures the dispersion of a dataset relative to its mean, used in finance to measure the volatility of an investment.

Risk-Free Asset

Risk-Free Asset is an investment with no risk of financial loss, often represented by government bonds of stable economies.

Asset Allocation

Allocating a portfolio across broad asset classes such as stocks versus bonds.

Risk-Free Asset

An investment with a guaranteed return and no risk of loss, often exemplified by government bonds of stable countries.