A Beta Coefficient for a Stock of 0

question 28

Multiple Choice

A beta coefficient for a stock of 0.8 implies​

• A) ​an 8% return on the market will cause the return on this stock to be 10%
• B) an 8% decrease in the market will cause the return on this stock to be 8%​
• C) ​a return of 10% on the market will cause the return on this stock to be 8%
• D) a return of 10% on the market will cause the return on this stock to be ‑8%​

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Definitions:

Cost of Equity

The return a company theoretically pays to its equity investors as a reward for taking on the risk of investing in the company.

Dividends

Payments made by a corporation to its shareholders, usually as a distribution of profits.

After Tax Cost

The actual cost of an investment or purchase after accounting for the effects of taxes on the price.

Corporate Tax Rate

The percentage of a corporation's profits that is paid to the government as tax.