The Risk-Free Rate of Return Is 5% and the Market

question 135

Multiple Choice

The risk-free rate of return is 5% and the market risk premium is 7%. What is the expected rate of return on a stock with a beta of 1.56?

• A) 10.23%
• B) 11.08%
• C) 12.00%
• D) 15.92%
• E) 16.36%

---

Definitions:

Quine

An American philosopher and logician known for his contributions to the philosophy of language, epistemology, and ontology, particularly his thesis of the indeterminacy of translation.

Presuppositions

Implicit assumptions or beliefs that are taken for granted in communication or reasoning.

Innate Ideas

Ideas that we are born with, which may include tendencies to think in certain ways that are hardwired into our minds.

Empirical Ideas

Concepts or thoughts derived from or verified by observation, experience, or experiment as opposed to theory or pure logic.