Stock J Has a Beta of 1

question 53

Multiple Choice

Stock J has a beta of 1.47 and an expected return of 15.8 percent.Stock K has a beta of 1.05 and an expected return of 11.9 percent.What is the risk-free rate if these securities both plot on the security market line?

• A)2.15 percent
• B)3.34 percent
• C)3.88 percent
• D)4.41 percent
• E)4.68 percent

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Definitions:

Tchebysheff's Theorem

A statistical theorem stating that for any distribution, the proportion of outcomes within k standard deviations of the mean is at least 1-1/k^2 for k>1.

Measure Of Shape

Statistical indicators that describe how a dataset is distributed along the axis, including skewness and kurtosis, which indicate asymmetry and the peakedness of the data distribution, respectively.

Tchebysheff's Theorem

A statistical rule that provides a minimum probability of outcomes within a certain number of standard deviations from the mean in any distribution.

Standard Deviations

Metrics that quantify the variations or dispersion around the mean in a data set, showing how spread out the values are.