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:

Dens of the Axis

A prominent feature of the second cervical vertebra (axis), providing a pivot that allows the head and the atlas to rotate around the spinal axis.

Transverse Process

A bony projection off the side of each vertebra in the spine, to which muscles and ligaments attach.

Spinous Process

A bony projection off the posterior (back) of each vertebra, serving as a point of attachment for muscles and ligaments.

Transverse Foramen

A characteristic feature of cervical vertebrae, through which the vertebral arteries pass.