RBC Stock Has a Beta of 0

question 54

Multiple Choice

RBC stock has a beta of 0.85,while TD stock has a beta of 1.21.The risk-free rate is 1.5%,and the expected return on a portfolio with 50% weight in RBC and the remainder in TD is 9.74%.What is the market risk premium?

• A)7%
• B)9.5%
• C)8%
• D)8.2%
• E)7.2%

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Definitions:

Labor Rate Variance

The difference between the actual cost of labor and the expected (or standard) cost, often used in manufacturing to measure efficiency and cost management.

Favorable

A term typically used in budgeting and accounting to describe variances or outcomes that are better than expected or budgeted figures.

Variable Overhead Rate Variance

The difference between the actual variable overhead incurred and the standard variable overhead estimated.

Variable Overhead Efficiency Variance

The difference between the actual hours taken to produce a good and the standard hours expected, multiplied by the variable overhead rate.