Suppose That the Simmons Corporation's Common Stock Has a Beta

question 41

Multiple Choice

Suppose that the Simmons Corporation's common stock has a beta of 1.6. If the risk-free rate is 5% and the market risk premium is 4%,the expected return on Simmons' common stock is:

• A) 4.0%.
• B) 5.0%.
• C) 5.6%.
• D) 10.6%.
• E) 11.4%.

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Definitions:

Slope

A measure of the steepness or inclination of a line, indicating the change in the vertical axis relative to the change in the horizontal axis.

Consumer

A consumer is an individual or group who purchases goods and services for personal use from the market, contributing to demand.

Budget Constraints

The limitations on the consumption bundles that a consumer can afford with a limited income.

Indifference Curves

Graphical representations used in economics to show combinations of two goods that give a consumer equal satisfaction and utility, illustrating their preferences.