Given the Following Information, Determine Which Beta Coefficient for Stock

question 60

Multiple Choice

Given the following information, determine which beta coefficient for Stock A is consistent with equilibrium: rA = 11.3%; rRF = 5%; rM = 10%

• A) 0.86
• B) 1.26
• C) 1.10
• D) 0.80
• E) 1.35

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Definitions:

Net Operating Income

A measure of a company's profitability from its core business operations, excluding deductions of interest and taxes.

Variable Costing

A costing method that includes only variable manufacturing costs in product costs, treating fixed manufacturing overhead as a period expense.

Unit Product Cost

The comprehensive expenditure involved in creating a single product unit, encompassing direct materials, direct labor, and assigned overhead costs.

Absorption Costing

A method in accounting that integrates every manufacturing expense – direct materials, labor, and all overheads (variable and fixed) – into the product’s price.