If the Interest Rate on Treasury Bills Is 6% and the Market

question 46

Multiple Choice

If the interest rate on Treasury bills is 6% and the market risk premium is 9%,then a stock with a beta of 1.5 would be expected to return:

• A) 12.0%.
• B) 17.0%.
• C) 19.5%.
• D) 21.5%.

---

Definitions:

Demand for Labor

The total amount of workers that employers are willing and able to hire at a given wage rate in a certain period.

Efficiency Wage

A theory suggesting that higher wages may increase worker productivity and efficiency by attracting better applicants, reducing turnover, and increasing worker morale.

Contract Curve

Curve showing all efficient allocations of goods between two consumers, or of two inputs between two production functions.

Utility Possibilities Frontier

Curve showing all efficient allocations of resources measured in terms of the utility levels of two individuals.