Stock A's Stock Has a Beta of 1

question 26

Multiple Choice

Stock A's stock has a beta of 1.30, and its required return is 12.00%.Stock B's beta is 0.80.If the risk-free rate is 4.75%, what is the required rate of return on B's stock? (Hint: First find the market risk premium.)

• A) 8.76%
• B) 8.98%
• C) 9.21%
• D) 9.44%
• E) 9.68%

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Definitions:

Organizational Buyers

Entities such as businesses, governments, or institutions that purchase goods or services for use in the production of other goods and services, for resale, or for general operations.

Ultimate Consumers

Refers to the end-users or buyers who purchase products or services for personal use and not for manufacturing or resale.

Organizational Buyers

Businesses, governments, or institutions that purchase goods or services for use in the production of other goods and services, for resale, or for the organization’s operations.

Reseller Market

A market wherein goods or services are purchased for the purpose of resale rather than personal use.