If the Equation Is the Linear Equation for the Security

question 96

Multiple Choice

If the equation is the linear equation for the Security Market Line, what portion represents the market risk premium for a stock that does not have a beta of 1.0?

• A) \( \beta_{\mathrm{i}} \)
• B) \( \left[\mathrm{E}\left(\mathrm{r}_{\mathrm{m}}\right)-\mathrm{rf}\right] \)
• C) \( r f \)
• D) \( \beta_{i} *\left[E\left(r_{m}\right)-r f\right] \)

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Definitions:

Sensorimotor Stage

In Piaget’s theory, the stage (from birth to about 2 years of age) during which infants know the world mostly in terms of their sensory impressions and motor activities.

Concrete Operational

A stage in cognitive development, according to Piaget, where children aged about 7-12 years develop logical thinking but are still not capable of abstract thinking.

Motor Development

The process through which humans progress through a predictable set of movements and physical abilities throughout their lifespan.

Maturation

The process of development in which an individual reaches physical, cognitive, and emotional maturity.