You Have the Following Data on (1) the Average Annual

question 105

Multiple Choice

You have the following data on (1) the average annual returns of the market for the past 5 years and (2) similar information on Stocks A and B. Which of the possible answers best describes the historical betas for A and B?

• A) bA > 0; bB = 1.
• B) bA > +1; bB = 0.
• C) bA = 0; bB = -1.
• D) bA < 0; bB = 0.
• E) bA < -1; bB = 1.

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Definitions:

Monthly Interest Rate

The interest rate reflected over a month period, often used for calculating the monthly interest payments on a loan.

Net Present Value

A financial metric indicating the value of all future cash flows of an investment, discounted back to present value.

Monthly Interest Rate

The interest rate applied on a monthly basis to loans or financial accounts, often used to calculate the monthly interest payments or earnings.

Net Savings

The amount of money saved after all expenses have been deducted.