Consider an Asset That Has a Beta of 1

question 70

Multiple Choice

Consider an asset that has a beta of 1.5. The return on the risk-free asset is 6.5% and the expected return on the stock index is 15%. The estimated return on the asset is 20%. Calculate the alpha for the asset.

• A)19.25%
• B)0.75%
• C)-0.75%
• D)9.75%
• E)9.0%

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Definitions:

Ketone

A class of organic compounds characterized by a carbonyl group (C=O) bonded to two carbon atoms.

Terpene

A large and varied class of organic compounds, produced primarily by a wide variety of plants, known for their strong odors.

Fatty Ester

An organic compound formed by the reaction of a fatty acid with an alcohol, commonly found in lipids and essential for various biological functions.

Methanol

A simple alcohol (CH3OH) used as a solvent, fuel, and antifreeze, and in the production of formaldehyde and acetic acid.