A Stock Has an Expected Return of 12

question 2

Multiple Choice

A stock has an expected return of 12.25 percent. The beta of the stock is 1.15 and the risk-free rate is 5 percent. What is the market risk premium?

• A) 1.30%
• B) 6.50%
• C) 15.00%
• D) 6.30%
• E) 7.25%

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Definitions:

Directly Observed

Pertains to an event or behavior watched or noted in person, without relying on indirect evidence or reports.

Psychoanalytic Theory

The idea that our thoughts and actions are influenced by specific unconscious forces.

Unconscious Mind

A part of the mind that influences thoughts and actions without one's awareness, according to Freudian theory.

Mental Processes

The internal cognitive mechanisms that include thinking, perceiving, problem-solving, and information processing.