If the Risk- Free Rate Is 6%, the Market Return

question 44

True/False

If the risk- free rate is 6%, the market return is 15%, and the beta of a share is 1.15, then the expected return on the share is 10.35%.

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Definitions:

Present Value

The value today of a sum of money or future cash flows, taking into account a specific rate of return.

Future Cash Flow

The projected movement of money into and out of a business or investment over future periods.

Avoidable Costs

Expenses that can be eliminated if a particular decision is made or if a business operation is discontinued.

Future Costs

Costs that have not yet been incurred but are expected to be spent in the future for operational or investment purposes.