If a Stock with a Beta of 1

question 66

Multiple Choice

If a stock with a beta of 1.4 is expected to return 18% when Treasury bills yield 6%,what is the expected return on the market portfolio?

• A) 8.67%
• B) 10.84%
• C) 12.02%
• D) 14.57%

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Definitions:

Portfolio

A collection of financial investments like stocks, bonds, commodities, cash, and cash equivalents, including closed-end funds and exchange traded funds (ETFs).

Return on Stocks

The earnings generated from investing in stocks, typically measured in terms of dividend payments and capital gains.

Return on Bonds

Return on bonds is the total income an investor receives from a bond, calculated as a percentage of the bond's purchase price, including interest payments and value appreciation.

Higher Risk

Refers to situations or investments that are more likely to result in loss or have a greater variability of returns.