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:

Sixth Unit

A term possibly denoting the incremental unit in a series, used in contexts like economics to discuss marginal utility or cost of the sixth item.

Budget Line

A graphical representation of all possible combinations of two goods that can be purchased with a given budget at fixed prices.

Shifting Outward

Refers to the expansion of production possibilities or outward movement of the production possibility frontier, indicating economic growth or improvement in resource availability.

Indifference Curves

Graphical representations showing different combinations of goods or services among which a consumer is indifferent.