A Stock Has a Beta of 1

question 64

Multiple Choice

A stock has a beta of 1.47 and an expected return of 16.6 percent.The risk-free rate is 4.8 percent.What is the slope of the security market line?

• A)6.49 percent
• B)7.28 percent
• C)8.03 percent
• D)9.03 percent
• E)9.99 percent

---

Definitions:

Laws Of Probability

The mathematical rules that describe the likelihood of certain events occurring, which govern random events and can predict the outcomes of complex systems.

Gambler's Fallacy

The false notion that if an event takes place more often than usual over a certain span, its occurrence will diminish in the future, or the contrary.

Availability Heuristic

A quick judgment method drawn from examples that surface quickly in one's thoughts when deliberating over a specific area, theory, approach, or verdict.

Independent

Not influenced or controlled by others; acting or existing freely.