Stock a Is a Risky Asset That Has a Beta

question 48

Multiple Choice

Stock A is a risky asset that has a beta of 1.4 and an expected return of 13.2%. Stock B is also a risky asset and has a beta of 1.25. The risk-free rate is 5.5%. Assuming both stocks are correctly priced, what is the expected return on Stock B?

• A)11.90%
• B)12.11%
• C)12.29%
• D)12.38%
• E)12.46%

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Definitions:

Civil War

A war between groups within the same country or state, often characterized by intense violence and lasting social and economic impact.

Emancipation Proclamation

An executive order issued by President Abraham Lincoln in 1863 that declared the freedom of slaves in the Confederate states.

Black Soldier

An African American military service member, particularly noted for their roles in various American conflicts where they served despite facing segregation and discrimination.

Black Servicemen

Refers to African American soldiers and military personnel who have served in the U.S. armed forces throughout the nation's history.