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:

Tax Rate

The amount of tax a person or company must pay, expressed as a percentage of income.

Optimal Level

The most efficient, effective, or desirable point or degree for a specific outcome or condition.

Financial Distress Costs

Expenses incurred by a company when it faces financial difficulties, including bankruptcy costs and the cost of lost opportunities.