The Current Risk-Free Rate of Return in the Economy Is

question 37

Essay

The current risk-free rate of return in the economy is 4%.In addition,the market rate of return is currently 9.5%.
A. Expected Return = Risk-free Interest Rate + Market Beta [Market Return - Risk-free Interest]
Expected Return = .04 + 1.2 [ .095 - .04] = 10.60%
A. Given this information, what would be the expected return on common stock for a company with a systemic risk level (Beta)of 1.2? Show your calculations.
B. Describe systemic risk.
B. Systemic Risk is the risk that affects all investments in common; it is the non-diversifiable risk.

---

Definitions:

Retro-

A prefix used in English, denoting backwardness, previousness, or action in a reverse direction.

Bradypnea

Abnormally slow breathing rate, which can be indicative of sleep states or medical conditions.

Premenstrual

Referring to the phase of a menstrual cycle immediately before menstruation begins, often associated with specific physical or emotional symptoms.

Pre-

A prefix indicating before, in front of, or prior to.