If the Expected Return on the Market Is 11

question 42

Multiple Choice

If the expected return on the market is 11.5%,then using the historical risk premium on large stocks of 8.6%,the current risk-free rate is:

• A)2.9%
• B)7.4%
• C)8.4%
• D)10.6%
• E)12.6%

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Definitions:

Politics

The activities associated with governance, or the debate and conflict among individuals or parties having or hoping to achieve power.

Pendleton Act

A federal law enacted in 1883 that established that positions within the federal government should be awarded on the basis of merit instead of political affiliation.

Spoils System

A practice where a political party, after winning an election, gives government jobs to its voters as a reward for working toward victory.

Pendleton Act

A United States federal law enacted in 1883, establishing that government jobs should be awarded based on merit rather than political affiliation.