A Stock Has an Expected Return of 14

question 33

Multiple Choice

A stock has an expected return of 14.3 percent, the risk-free rate is 3.2 percent, and the market risk premium is 8.1 percent. What must the beta of this stock be?

• A) 0.88
• B) 0.94
• C) 1.08
• D) 1.21
• E) 1.37

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Definitions:

Mean

The arithmetic average of a set of numbers, calculated by dividing the sum of the values by the number of values.

Variance

A measure of how much values in a dataset differ from the mean, indicating the distribution's spread.

Standard Deviation

The measure of the dispersion of a set of values relative to its mean, indicating how spread out the values are.

Standard Normal Curve

A bell-shaped curve that is symmetric about the mean, representing the distribution of a standard normal variable with a mean of zero and a variance of one.