The Expected Return on JK Stock Is 16

question 64

Multiple Choice

The expected return on JK stock is 16.28 percent while the expected return on the market is 11.97 percent. The stock's beta is 1.63. What is the risk-free rate of return?

• A) 2.22 percent
• B) 4.31 percent
• C) 2.42 percent
• D) 4.50 percent
• E) 5.13 percent

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Definitions:

Contribution Margin

The amount remaining from sales revenue after variable expenses have been deducted, contributing to covering fixed expenses and profit.

Variable Expenses

Expenditures that change in direct relation to production levels or sales quantities.

Mixed Cost

A cost composed of a mixture of fixed and variable components. Costs are fixed for a set level of production or consumption, becoming variable with further production or consumption.

Fixed Expenses

Regular expenses that do not vary in total over a wide range of activity levels.