Stock a Has a Standard Deviation of 20% and a Correlation

question 105

Multiple Choice

Stock A has a standard deviation of 20% and a correlation coefficient of 0.64 with market returns.The market risk premium is 12% with a standard deviation of 15%.The risk-free rate is 5%.What is the required rate of return of Stock A?

• A)8.58%
• B)10.95%
• C)12.47%
• D)15.20%

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Definitions:

Self-report Inventories

Psychological tests in which individuals provide subjective evaluations or reports of their own behavior, feelings, or attitudes.

Criticisms

The act of expressing disapproval and objections about something, often involving the analysis and judgment of faults or mistakes.

Trait Approach

A perspective in personality psychology that focuses on the identification and measurement of specific personality traits in order to predict behavior and outcomes.