The Risk-Free Rate Is 3

question 10

Multiple Choice

The risk-free rate is 3.4 percent and the expected return on the market is 10.8 percent.Stock A has a beta of 1.18.For a given year,stock A returned 13.6 percent while the market returned 11.8 percent.The systematic portion of the unexpected return was ________ percent and the unsystematic portion was ________ percent.

• A) 1.045; 0.207
• B) 1.145; 0.126
• C) 1.180; 0.288
• D) 1.344; 1.443
• E) 1.500; 1.449

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Definitions:

Flexible Budget

An adaptable budget that shifts in response to changes in the amount of activity or volume.

Net Operating Income

A financial metric that calculates a company’s income after operating expenses are subtracted but before interest and taxes are deducted.

Flexible Budget

A budget that adjusts or flexes with changes in volume or activity levels of the business, allowing for more accurate financial planning.

Total Expenses

The sum of all costs and expenditures that a company incurs in a specific period, including operating and non-operating expenses.