What Will Happen to the Expected Return on a Stock

question 56

Multiple Choice

What will happen to the expected return on a stock with a Beta of 1.5 and a market risk premium of 9% if the Treasury bill yield increases from 3% to 5%?

• A)The expected return will remain unchanged
• B)The expected return will increase by 1.0%
• C)The expected return will increase by 2.0%
• D)The expected return will increase by 3.0% Expected return = 3% + 1.5(9)
• = )165
• Expected return = 5% + 1.5(9)
• = 18.5%

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