The Two Factor Model on a Share Provides a Risk

question 2

Multiple Choice

The two factor model on a share provides a risk premium for exposure to market risk of 9%, a risk premium for exposure to interest rate of (-1.3%) , and a risk-free rate of 3.5%. What is the expected return on the share?

• A)8.7%
• B)11.2%
• C)13.8%
• D)15.2%

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Definitions:

Band

A small, nomadic, and kinship-based group of people who subsist primarily through hunting, gathering, or fishing.

States

Politically defined territories that have organized governments, populations, and sovereignty over the land.

Political Organization

The way in which a society creates and structures its political institutions, processes, and relationships to make collective decisions and govern behavior.

Chiefdoms

A form of hierarchical political organization in non-industrial societies usually based on kinship, and led by a chief.