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

question 21

Multiple Choice

Assume that the risk-free rate of return is 4 percent,and the expected return on the market portfolio is 10 percent.If the systematic risk inherent in the stock of ABC Corporation is 1.80,using the Capital Asset Pricing Model (CAPM) calculate the expected return of ABC.

• A)14.0 percent
• B)14.8 percent
• C)16.0 percent
• D)16.8 percent

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Definitions:

Individual

Pertaining to a single person or thing, as opposed to a group or collective.

Duration of Behavior

The length of time over which a particular behavior or set of behaviors is observed or continues to occur.

Identified Stimulus

A specific environmental cue or event that is recognized and can trigger a particular response.

Magnitude

in a general sense, refers to the size, extent, or importance of something. In a scientific context, it often relates to the quantitative measure of a physical property.