What Rate of Return Should an Investor Expect for a Stock

question 46

Multiple Choice

What rate of return should an investor expect for a stock that has a Beta of 0.8 when the market is expected to yield 14% and Treasury bills offer 6%?

• A)9.2%
• B)11.2%
• C)12.4%
• D)12.8% r = r_f + B(r_m - r_f)
• = 6% +.8(14% - 6%)
• = 6% + 6.4%

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Definitions:

Budget

An itemized forecast of an entity’s income and expenses expected for a specific period, usually showing how much money it intends to earn, spend, and save.

Donations

Voluntary transfers of resources, such as money or goods, to individuals or organizations without the expectation of direct return or compensation.

Spending Variances

Differences between the budgeted or standard cost amounts and the actual costs incurred.

Favorable

A term used in financial analysis to describe a situation, condition, or variance that leads to a positive outcome or better-than-expected results.