Assume the Risk-Free Rate of Return (RRF) Is 5 Percent $\beta$

question 34

Multiple Choice

Assume the risk-free rate of return (rRF) is 5 percent, the market risk premium (RPM) is 8 percent, and an investment exists that has a beta (( $\beta$ ) .) equal to 1.5.According to the Capital Asset Pricing Model (CAPM) , which of the following statements is correct?

• A) The risk premium associated with the investment would be 12 percent.
• B) The appropriate rate of return for the investment is 9.5 percent.
• C) All investments that have betas less than 1.0 must earn a total rate of return less than 8 percent.
• D) There is not enough information to answer this question.
• E) None of the above is a correct statement.

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Definitions:

α-D-Ribopyranose

An aldopentose sugar in the pyranose form where the α-configuration at the anomeric carbon is specific to the D-ribose structure.

Ordinal Data

A type of categorical statistical data type in which the order of the values is significant but the difference between each one is not necessarily uniform.

Nominal Data

Nominal data represents categories that cannot be logically ordered or ranked, where each category is mutually exclusive and there is no inherent arithmetic relationship among them.

Ordinal Data

A type of categorical data with a set order or ranking among the categories but without a defined distance between categories.