The Risk-Free Rate Is 3 A)209%
B)3

question 83

Multiple Choice

The risk-free rate is 3.5%. What is the expected risk premium on this security given the following information?
$\begin{array}{lcc}\text { State of the Economy }&\text { Probability}&\text { E(R) }\\\text { Boom } & .30 &15\% \\\text { Normal } & .55 &8\% \\\text { Recession } & .20 & -11 \%\end{array}$

• A)2.09%
• B)3.01%
• C)3.20%
• D)3.87%
• E)4.15%

---

Definitions:

Racial Minorities

Ethnic groups that are represented in smaller numbers within a particular nation or society compared to the dominant group.

Environmental Racism

The practice of disproportionately situating environmental hazards and harmful industries near minority or low-income communities.

Imperfect Price Signals

Situations in which prices do not fully reflect all the relevant information, leading to inefficiencies or misallocations in the market.

Actual Cost

The total expenditure incurred in the production of goods or services, including all direct and indirect costs.