Stock a Has an Expected Return of 15

question 78

Multiple Choice

Stock A has an expected return of 15.6 percent and a beta of 1.27.Stock B has an expected return of 11.4 percent and a beta of 0.89.Both stocks have the same reward-to-risk ratio.What is the risk-free rate?

• A)1.56 percent
• B)2.28 percent
• C)2.79 percent
• D)3.35 percent
• E)3.92 percent

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Definitions:

Sickles

Curved, hand-held agricultural tools used for harvesting grain crops or cutting grass for hay.

Potatoes

A tuberous crop from the perennial nightshade Solanum tuberosum, widely cultivated for its edible starchy tubers.

Food Foragers

Food foragers are individuals or groups who sustain themselves by collecting wild plants, hunting animals, and gathering other food resources available in their environment.

Food Production

The process that involves growing crops and raising livestock for human consumption.