A Stock's Average Return Is 11 Percent

question 13

Multiple Choice

A stock's average return is 11 percent. The average risk-free rate is 9 percent. The stock's beta is 1, and the standard deviation of its returns is 10 percent. What is the Sharpe index?

• A) 0.05
• B) 0.5
• C) 0.1
• D) 0.02
• E) 0.2

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Definitions:

Direct Labor-Hours

The total hours worked by employees directly involved in the manufacturing of a product.

Variable Manufacturing Overhead

Costs that vary with the level of production output and may include expenses such as indirect materials, utilities, and overtime labor.

Raw Materials

Primary substances or components that are converted through the manufacturing process into a finished product.

Quantity Variance

The difference between the actual quantity of materials or labor used in production and the expected quantity, based on standard costs.