Stock X Has a Beta of 1

question 45

Multiple Choice

Stock X has a beta of 1.02 and an expected return of 11.8%. Stock Y has a beta of 1.15 and an expected return of 13.1%. What is the risk-free rate of return assuming that both Stock X and Stock Y are correctly priced?

• A)1.10%
• B)1.60%
• C)2.06%
• D)3.30%
• E)3.50%

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Definitions:

Disequilibrium Principle

A state or condition where there is a lack of balance or stability, particularly within economic models or physical systems.

Operant Conditioning

A method of learning that occurs through rewards and punishments for behavior, thereby influencing the probability of that behavior being repeated.

Classical Conditioning

An educational method involving the repeated pairing of two stimuli, resulting in a reaction initially provoked by the second stimulus being eventually provoked by the first stimulus.

Secondary Reinforcer

A stimulus that gains its reinforcing power through its association with a primary reinforcer.