Consider the CAPM

question 83

Multiple Choice

Consider the CAPM. The risk-free rate is 5%, and the expected return on the market is 15%. What is the beta on a stock with an expected return of 17%?

• A) .5
• B) .7
• C) 1
• D) 1.2

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Definitions:

Perpetuity

A type of annuity that generates an infinite series of payments into the future, without an end date.

Present Value

The value now of a future monetary total or cash flows, based on an established return rate.

Cash Flow

The overall flow of cash and assets similar to cash entering and exiting a corporation.

Present Value

The value today of a sum of money expected in the future or a series of financial inflows, calculated with a specified rate of interest.