A Stock Has a Beta of 1

question 42

Multiple Choice

A stock has a beta of 1.4. The expected return on the market is 8% and T-bills are yielding 2%. What is the expected return on the stock?

• A) 8.40%
• B) 9.65%
• C) 10.40%
• D) 11.65%
• E) 13.20%

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Definitions:

Net Profit Margin Percentage

A financial metric that shows the percentage of net income generated from total revenues, indicating a company's profitability.

Year 2

Typically refers to the second year of operation, reporting, or analysis within a given context, such as fiscal years, project timelines, or investment periods.

Return On Equity

A measure of a corporation's profitability that reveals how much profit a company generates with the money shareholders have invested.

Dividend Payout Ratio

The percentage of net income that a company pays out to its shareholders as dividends, indicating how much money a company returns to shareholders versus retaining.