Determine the Risk Free Rate If a Company's Rate of Return

question 7

Multiple Choice

Determine the risk free rate if a company's rate of return is 12%, its Beta is -1.2 and the expected return on the stock market is 14%.

• A)11.19%
• B)12.29%
• C)13.09%
• D)14.19%

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Definitions:

Inelastic Demand

A scenario in which the need for a product remains largely unaffected despite variations in its price.

Excise Tax

A tax levied on specific goods, services, and activities, such as tobacco, alcohol, and gambling, often used to discourage their use and generate government revenue.

Largest Source

Refers to the main or biggest origin of something, such as the largest source of revenue for a business or the largest source of pollution in an area.

Sales Tax

A tax levied on the cost (at retail) of a broad group of products.