A Risky Asset Has a Beta of

question 34

Multiple Choice

A risky asset has a beta of .88 and an expected return of 7.4 percent. What is the reward-to-risk ratio if the risk-free rate is 2.8 percent?

• A) 4.04 percent
• B) 5.23 percent
• C) 6.51 percent
• D) 8.41 percent
• E) 11.59 percent

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Definitions:

Entrance Fee

A charge for entering a facility, participating in an event, or joining an organization or club.

Fixed Inspection Cost

A cost that remains constant in total for the inspection process regardless of the level of production.

Machine-Hours

An assessment of the level of productivity or operational activity, based on the time span machinery is active.

Sales Commissions

Payments made to sales employees as a percentage of the sales they generate.