Stock a Is a Risky Asset That Has a Beta

question 46

Multiple Choice

Stock A is a risky asset that has a beta of 1.4 and an expected return of 13.2 percent.Stock B is also a risky asset and has a beta of 1.25.The risk-free rate is 5.5 percent.Assuming both stocks are correctly priced,what is the expected return on stock B?

• A) 11.90 percent
• B) 12.11 percent
• C) 12.29 percent
• D) 12.38 percent
• E) 12.46 percent

---

Definitions:

Cultural Mores

The accepted traditional customs, moral attitudes, and manners of a society or social group.

Politically Rebellious

Characteristic of individuals or groups that challenge or resist established political authorities and norms, often seeking significant changes or reforms.

Commerce

The activity of buying and selling, especially on a large scale, encompassing trade and business transactions.

Hip-hop Music Artists

Musicians and performers who create music within the hip-hop genre, a cultural movement characterized by rap, DJing, breakdancing, and graffiti.