The Excess Return Earned by an Asset That Has a Beta

question 60

Multiple Choice

The excess return earned by an asset that has a beta of 1.34 over that earned by a risk-free asset is referred to as the:

• A) market risk premium.
• B) risk premium.
• C) systematic return.
• D) total return.
• E) real rate of return.

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Definitions:

Tax Rate

The specific percentage at which income is taxed for individuals and corporations.

Bonds

Bonds are fixed-income instruments that represent a loan made by an investor to a borrower, typically corporate or governmental, which pays periodic interest payments and the return of the principal at maturity.

Common Shares

Equity securities that represent ownership in a corporation, giving holders voting rights and a share of the company's profits through dividends.

Preferred Shares

Preferred shares are a class of ownership in a corporation that has a higher claim on assets and earnings than common shares, typically entitling shareholders to fixed dividends ahead of common stockholders.