Assume That the Risk-Free Rate of Return Is 4%,and the Expected

question 17

Multiple Choice

Assume that the risk-free rate of return is 4%,and the expected return on the market portfolio is 10%.If the expected return of ABC is 12% the firm's beta calculate using the Capital Asset Pricing Model (CAPM) .

• A)1
• B)1.25
• C)1.33
• D)1.5

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Definitions:

Times Interest Earned

A ratio assessing a firm's capability to fulfill its debt responsibilities through the comparison of its earnings before interest and taxes against its interest expenditures.

Company's Risk

Refers to the inherent uncertainties and potential financial losses a company faces in the course of its operations.

Employer Payroll Taxes

Taxes that employers are required to pay on behalf of their employees, including Social Security and Medicare taxes, federal and state unemployment insurance.

Note Payable

A documented commitment to repay a certain sum of money, typically including interest, at a predetermined time in the future.