A Risky Asset Has a Beta of 1

question 35

Multiple Choice

A risky asset has a beta of 1.64 and the expected return of 18.8%. What is the risk-free rate if the reward-to-risk ratio is 7%?

• A) 7.50%
• B) 7.32%
• C) 5.73%
• D) 6.94%
• E) 7.09%

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Definitions:

General Journal

A primary accounting record used for the chronological recording of all types of transactions.

Utilities Expense

Costs incurred by a business for essential services such as water, electricity, and gas.

General Journal

A comprehensive journal that records all the day-to-day financial transactions of a company, including debits and credits.

Common Stock

A type of equity security that represents ownership in a corporation, with rights to share in its profits and vote in major decisions.