A Stock with a Beta of Zero Would Be Expected

question 38

Multiple Choice

A stock with a beta of zero would be expected to have a rate of return equal to

• A)the prime rate.
• B)the average AAA bond.
• C)the market rate.
• D)the risk-free rate.
• E)zero.

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Definitions:

Common Stock

Equity ownership in a corporation, giving shareholders voting rights and a share in the company's profits through dividends.

Cost Of Debt

The effective rate that a company pays on its current debt, incorporating interest payments and other related expenses.

Loaned Funds

Money that is borrowed, typically from a financial institution, which requires repayment with interest.

Coupon Rate

The percentage of the face value that is paid as interest on a bond annually.