A Stock Has an Expected Return of 15

question 53

Multiple Choice

A stock has an expected return of 15.10 percent and a beta of 1.30.What is the risk-free rate if the market rate is 13.1 percent?

• A) 6.43 percent
• B) 6.92 percent
• C) 7.01 percent
• D) 7.30 percent
• E) 7.90 percent

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Definitions:

Defense Mechanism

Psychological strategies employed by individuals to cope with reality and maintain self-image by unconsciously denying or distorting reality.

Reaction Formation

A psychological defense mechanism in which a person unconsciously replaces unacceptable thoughts or feelings with their opposites.

Phallic Stage

A phase in Freud's psychosexual development theory, occurring from about ages 3 to 6, where the libido's focus is on the genital area.

Psychosexual Development

A Freudian theory that proposes that child development occurs in a series of stages which are characterized by sexual pleasures focusing on different parts of the body.