Use the Security Market Line to Determine the Required Rate

question 93

Multiple Choice

Use the security market line to determine the required rate of return for the following firm's stock.The firm has a beta of 1.20,the required return in the market place is 10.00%,and the risk-free rate of return is 1.50%.

• A)11.70%
• B)10.70%
• C)7.20%
• D)2.80%

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Definitions:

Universal Life Insurance

A flexible type of permanent life insurance offering the low-cost protection of term life insurance as well as a savings element (like whole life insurance), which is invested to provide a cash value buildup.

Term Life Insurance

An insurance policy that provides coverage at a fixed rate of payments for a limited period of time, after which coverage expires without accumulating cash value.

Whole Life Insurance

A type of permanent life insurance policy that provides coverage for the insured's entire life, typically including a savings component.

Premiums

Payments made for insurance coverage, representing the cost of the insurance policy to the holder, typically made on a regular basis.