The Risk-Free Rate and the Expected Market Rate of Return

question 18

Multiple Choice

The risk-free rate and the expected market rate of return are 0.056 and 0.125, respectively. According to the capital asset pricing model (CAPM) , the expected rate of return on a security with a beta of 1.25 is equal to

• A) 0.142.
• B) 0.144.
• C) 0.153.
• D) 0.134.
• E) 0.117.

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Definitions:

Exercises Power

The act of utilizing control or authority to influence others or outcomes in various contexts.

Staff Units

Specialized departments or personnel that provide support, advice, and expertise to line units within an organization, rather than being directly involved in day-to-day operations.

Specialized Expertise

Specific, advanced knowledge or skills in a particular field or area of study.

Horizontal Division

The organizational structure that involves dividing a company based on different types of jobs or tasks, leading to departments that are on the same level.