Zelo,Inc Stock Has a Beta of 1

question 37

Multiple Choice

Zelo,Inc. stock has a beta of 1.23. The risk-free rate of return is 4.5% and the market rate of return is 10%. What is the amount of the risk premium on Zelo stock?

• A) 4.47%
• B) 5.50%
• C) 5.54%
• D) 6.77%
• E) 12.30%

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Definitions:

Market Value

The current price at which an asset or a company can be bought or sold in the open market.

Value Weighted Index

An index in which each constituent is weighted according to its market value, reflecting the performance of the market based on total capitalization.

Share Weighted Index

A stock market index in which each company is weighted according to the total value of its outstanding shares.

Price Weighted Index

A stock market index in which each company's stock influences the index in proportion to its price per share.