Alpha Inc'S Beta Coefficient Is 1

question 6

Multiple Choice

Alpha Inc.'s beta coefficient is 1.2, the risk-free rate is 10 percent, and the market risk premium is 5 percent. Based on the capital asset pricing model (CAPM) , what should be Alpha's cost of retained earnings?

• A)11%
• B)17%
• C)12%
• D)18%
• E)16%

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Definitions:

Disequilibrium Principle

The state of imbalance or disequilibrium in an eco-system or in a market, which can lead to significant shifts or adjustments within that system.

Classical Conditioning

A learning process that involves creating associations between a naturally occurring stimulus and a previously neutral stimulus.

Law of Effect

A psychological principle suggesting that behaviors followed by positive outcomes are likely to be repeated, while those with negative outcomes are not.

Spontaneous Recovery

The reappearance of a previously extinguished conditioned response after a pause, without the need for further conditioning.