The Risk-Free Rate Is 3

question 35

Multiple Choice

The risk-free rate is 3.1 percent and the expected return on the market is 11 percent. Stock A has a beta of 1.34. For a given year, Stock A returned 16.7 percent while the market returned 12.2 percent. The systematic portion of Stock A's unexpected return was _____ percent and the unsystematic portion was _____ percent.

• A) 1.41; 1.61
• B) 1.61; 1.41
• C) 1.61; 3.01
• D) 1.41; 1.20
• E) 4.62; 1.41

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Definitions:

Minimum Acceptable

The lowest or least satisfactory condition or performance level that is considered adequate or permissible.

Income From Operations

This is a measure of the profit made from a business's core operations, excluding revenues and expenses from non-operational activities.

Invested Assets

Funds or resources that have been allocated into various types of investments, such as stocks, bonds, or real estate, with the expectation of generating income or profit.

Minimum Return

The lowest acceptable return on an investment, set by an investor or implied by a financial model or market expectation.