There Is a 35 Percent Probability That a Particular Stock

question 86

Multiple Choice

There is a 35 percent probability that a particular stock will earn a 16 percent return and a 65 percent probability that it will earn 10 percent.What is the risk-free rate if the risk premium on the stock is 7.5 percent?

• A) 4.20 percent
• B) 4.60 percent
• C) 5.20 percent
• D) 5.40 percent
• E) 5.80 percent

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Definitions:

Characteristic

A feature or quality that helps to identify, tell apart, or describe recognizably; a distinguishing trait.

Passive

A term describing a lack of action or initiative, often allowing things to happen without trying to change the outcome.

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Marketing Department

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