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:

Option Contract

A financial derivative that gives the buyer the right, but not the obligation, to buy or sell an asset at a specified price on or before a specified date.

Exercise Price

The cost at which an options contract's owner has the right to purchase or sell the underlying asset.

Time Value

The concept that money available now is worth more than the identical sum in the future due to its potential earning capacity.

January Call

In finance, might refer to a call option that expires in January, allowing investors to purchase stock at a specified price within a given time frame.