Stock a Has a Required Return of 18% and a Beta

question 60

Multiple Choice

Stock A has a required return of 18% and a beta of 1.4. The expected market return is 14%. What is the risk-free rate?

• A)0.6%
• B)1.2%
• C)3.0%
• D)4.0%
• E)6.0%

---

Definitions:

Dominant Gene

A gene that expresses its phenotype over another gene's phenotype when the two are paired together in an organism.

Recessive

Describes a genetic trait that is expressed in an organism’s phenotype only when two copies of the gene are present, one from each parent.

Recessive Genes

Genetic traits that require two copies (one from each parent) to be expressed in the offspring. If only one copy is present, the trait will not manifest because it is masked by a dominant gene.

Dominant Genes

These are genes that are expressed over other genes, called recessive genes, in determining certain traits in an organism.