A Risky Asset Has a Beta of 1

question 4

Multiple Choice

A risky asset has a beta of 1.40 and an expected return of 17.6%. What is the risk-free rate if the risk-to-reward ratio is 8.4%?

• A)2.74%
• B)4.03%
• C)4.33%
• D)5.32%
• E)5.84%

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Definitions:

Concurrent Validity

The degree to which the measures gathered from one assessment tool agree with the measures gathered from other assessment techniques.

Predictive Validity

refers to the extent to which a score on a scale or test predicts future performance on a related task.

Standardization

The process of establishing consistency in the way data is collected, procedures are conducted, or products are manufactured, often to ensure quality and comparability.

Face Validity

The degree to which a test appears to measure what it is intended to measure at face value.