Stock X Has a Beta of

question 33

Multiple Choice

Stock X has a beta of .95 and an expected return of 10.8 percent.Stock Y has a beta of 1.2 and an expected return of 13.1 percent.What is the risk-free rate of return assuming that both stock X and stock Y are correctly priced?

• A)1.10 percent
• B)1.20 percent
• C)2.06 percent
• D)3.30 percent
• E)3.50 percent

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Definitions:

Bohannon

Refers to Paul Bohannon, an anthropologist known for his work on divorce and the phases individuals go through during the divorce process.

Disillusioned

Feeling disappointment upon discovering that something is not as good as one believed it to be.

Rejected

Being dismissed or refused acceptance, acknowledgment, or approval by others.

Detaches Emotionally

The process or action by which an individual emotionally withdraws or distances themselves from others or certain situations.