The Expected Rate of Return on Rewind Industries Is 2

question 54

Multiple Choice

The expected rate of return on Rewind Industries is 2.5 times the 12 percent expected rate of return from the market. What is Rewind's beta if the risk-free rate is 6 percent?

• A) 2
• B) 3
• C) 4
• D) 5
• E) 6

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Definitions:

Frustration of Purpose

A doctrine in contract law that excuses performance of a contract when an unforeseen event undermines the contract's original reason for existence.

Liquidated Damages Clause

A contractual provision that specifies the amount of damages to be paid if a party breaches the agreement.

Earthquake

An earthquake is a natural phenomenon characterized by a sudden and violent shaking of the ground, often resulting from the movement of the Earth's tectonic plates.

Renovations

The process of improving or modernizing a building, room, or structure to enhance its appearance, functionality, or value.