A Security Has an Expected Rate of Return of 0

question 9

Multiple Choice

A security has an expected rate of return of 0.10 and a beta of 1.1.The market expected rate of return is 0.08 and the risk-free rate is 0.05.The alpha of the stock is

• A)1.7%.
• B)-1.7%.
• C)8.3%.
• D)5.5%.
• E)none of the above.

---

Definitions:

Orbitals

Mathematical functions describing the regions of space around an atom where electrons are likely to be found.

Spherical Symmetry

A form of symmetry where an object appears the same from any point of view, characteristic of some molecules.

P Orbitals

Atomic orbitals that are dumbbell-shaped, indicating the regions where electrons can be found, involved in forming pi bonds.

Electron Shell

A grouping of electrons surrounding the nucleus of an atom, where electrons are most likely to be found.