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:

Appreciation

An increase in the value of a currency in terms of other currencies.

Euro

The official currency used by 19 of the 27 European Union countries, also known as the eurozone.

Dollar

A currency unit used by the United States and other countries, represented by the symbol $, and used as a standard monetary unit in international transactions.

Exchange Rate

The price of one currency in terms of another currency, which determines how much foreign currency one can buy with a unit of domestic currency.