Stock a Has a Beta of 1

question 51

Multiple Choice

Stock A has a beta of 1.47 while Stock B has a beta of 1.08 and an expected return of 13.2 percent.What is the expected return on Stock A if the risk-free rate is 4.5 percent and both stocks have equal reward-to-risk premiums?

• A)12.12 percent
• B)15.07 percent
• C)16.34 percent
• D)16.89 percent
• E)17.78 percent

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Definitions:

Auditing Experience

The professional knowledge and skill gained through performing audits, typically used by accountants and auditors to ensure financial statements are accurate and comply with laws and regulations.

Independence

The state of being free from external control or influence, often related to auditor's neutrality.

Conceptual Framework

A set of fundamental principles and objectives that guides the development of accounting standards and practices.

General Purpose

Aimed to serve a wide range of uses or objectives rather than being specialized for a specific function or task.