What Is the Expected Return on a Stock with a Beta

question 55

Multiple Choice

What is the expected return on a stock with a beta of 0.8,given a risk free rate of 3.5% and an expected market return of 15.5%?

• A) 3.8%
• B) 13.1%
• C) 15.6%
• D) 19.1%

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Definitions:

Slope

In mathematics, the steepness or incline of a line, indicating the rate of change between two variables.

Intercept

In the context of a linear equation, the value at which the line crosses the y-axis when all independent variables are set to zero.

Linear Regression Equation

An equation that describes the relationship between a dependent variable and one or more independent variables using a straight line.

Horizontal Line

In a graph or diagram, a straight line that runs left to right parallel to the x-axis, indicating a constant value.