Suppose You Forecast That the Market Index Will Earn a Return

question 18

Multiple Choice

Suppose you forecast that the market index will earn a return of 15% in the coming year.Treasury bills are yielding 6%.The unadjusted β of Mobil stock is 1.30.A reasonable forecast of the return on Mobil stock for the coming year is _________ if you use Merrill Lynch adjusted betas.

• A) 15.0%
• B) 15.5%
• C) 16.0%
• D) 16.8%
• E) none of these

---

Definitions:

Survey Question

A question used in a survey designed to collect data on the opinions, behaviors, or characteristics of respondents.

Probability Density Function

A function that describes the relative likelihood for a continuous random variable to take on a given value.

Smooth Curve

A continuous, gently bending line without sharp angles or disruptions, often used in graphing data or in mathematical functions.

Total Area

The sum of all the specific areas within a boundary, often referring to the total surface area covered by a two-dimensional shape or land parcel.