Stock Y Has a Beta of 0

question 59

Multiple Choice

Stock Y has a beta of 0.8 and a required rate of return of 10%.What is the market risk premium if the risk-free rate is 5%?

• A)5.00%
• B)4.75%
• C)6.25%
• D)7.50%

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Definitions:

Surplus Funds

Excess money or assets that remain after all expenses have been paid.

Maturing

The process by which a financial instrument reaches its due date and the principal is required to be repaid.

Interest Rate

The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the principal.

Economic Equivalent

A financial concept that refers to the equivalence in value between different sums of money received or paid at different times, based on a specified interest rate.