Stock X and the "Market" Had the Following Returns During $$\begin{array} { r r } 1&150 & 10.0\\2&5.0 & 5.0 \\3&- 15.0 & - 5.0\end{array}$$

question 22

Multiple Choice

Stock X and the "market" had the following returns during the last three years, and the same relative volatility is expected to exist in the future: Year Stock X Market
$$\begin{array} { r r } 1&150 & 10.0\\2&5.0 & 5.0 \\3&- 15.0 & - 5.0\end{array}$$ The riskless rate is rRF = 8%, and the expected return on the market is 12 percent.If equilibrium exists, what is the expected return on Stock X?

• A)?4%
• B)8%
• C)12%
• D)14%
• E)16%

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Definitions:

Income Distribution

Refers to the way total personal income is distributed among individuals or households in an economy, affecting economic inequality.

Reservation Price Model

A model that defines the maximum price a consumer is willing to pay for a good or service.

Aggregate Demand

The aggregate need for all products and services in an economy, measured at a specific price level and during a particular time frame.

Marginal Revenue

The additional income generated from selling one more unit of a product or service.