If a Share Has a Beta Coefficient, $\beta$ ), Equal to 1

question 31

Multiple Choice

If a share has a beta coefficient, ( $\beta$ ) ., equal to 1.20, the risk premium associated with the market is 9 percent, and the risk-free rate is 5 percent, application of the capital asset pricing model indicates the appropriate return should be __________.

• A) 9.8%
• B) 14%
• C) 5%
• D) 15.8%
• E) None of the above is correct.

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Definitions:

Par Value

The nominal or face value of a bond, stock, or other financial instrument, as stated by the issuer.

Treasury Stock

Shares that were issued and subsequently reacquired by the issuing company, reducing the amount of outstanding stock on the open market.

Paid-in Capital

The amount of money that shareholders have invested in a company in exchange for ownership, excluding earnings or retained profits.

Retained Earnings Appropriation

Portions of retained earnings that are set aside for specific purposes, such as future expansion or debt repayment, indicating they are not available for dividend distribution.