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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Definitions:

Nestlé

Nestlé is a multinational packaged foods and beverage company headquartered in Switzerland, known for its wide range of products including baby food, bottled water, coffee, dairy products, and more.

General Mills

An American multinational manufacturer and marketer of branded consumer foods sold through retail stores, known for products like cereals, snacks, and more.

Vertical Marketing Systems

A coordinated approach to distribution and marketing designed to ensure that products or services flow smoothly from the producer to the consumer with the involvement of various intermediaries.

Channel Economies

The cost savings and efficiency gains derived from using effective distribution channels to deliver products or services to consumers.