A Stock Has a Beta Coefficient, β, Equal to 1

question 32

Multiple Choice

A stock has a beta coefficient, β, equal to 1.20. The risk premium associated with the market is 9 percent, and the risk-free rate is 5 percent. Application of the capital asset pricing model indicates that the stock's appropriate return should be _____. 

• A)9.8%
• B)5.2%
• C)12.5%
• D)15.8%
• E)17.2%

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Definitions:

Canalized Trait

A characteristic that is genetically determined to a high degree, showing little variation in the population due to environmental influences.

Genetic-Environment Correlation

The concept that an individual's genes influence their environment, and their environment affects the expression of their genes.

Environmental Influence

The effect of surroundings, including physical, social, and cultural factors, on individuals' development, behavior, and wellbeing.

Canalized

Describes traits or behaviors that are strongly genetically determined and less influenced by environmental factors.