A Stock Has a Beta of 1

question 18

Multiple Choice

A stock has a beta of 1.4 and an expected return of 13.53%.What is the risk-free rate if the market rate of return is 10.6%?

• A) 2.825%
• B) 3.250%
• C) 3.275%
• D) 3.415%

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Definitions:

Corporations

Legal entities that are separate from their owners, with the ability to own assets, incur liabilities, and engage in business activities.

Other Banks

Financial institutions that provide a range of services including deposits, loans, and investment products, distinct from the context's primary banking entity.

Clearing House Interbank Payments System

A network used by financial institutions to send and receive payments or securities in large volumes, typically for bank-to-bank transactions.

Society of Worldwide Interbank Financial Telecommunications

An international messaging network used by banks and financial institutions to securely transmit information and instructions.