Stock X Has a Beta of

question 43

Multiple Choice

Stock X has a beta of .87 and an expected return of 9.8 percent. Stock Y has a beta of 1.2 and an expected return of 13.1 percent. What is the risk-free rate of return assuming that both stock X and stock Y are correctly priced?

• A) 1.10 percent
• B) 1.20 percent
• C) 2.07 percent
• D) 3.30 percent
• E) 3.50 percent

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Definitions:

Volvulus

A condition where a loop of the intestine twists around itself and the mesentery that supports it, potentially causing bowel obstruction.

Cirrhosis

A chronic liver disease marked by the replacement of healthy liver tissue with scar tissue, often due to alcohol abuse or hepatitis infections.

Diverticulitis

Inflammation or infection of one or more diverticula, small bulges or pockets that can form in the lining of the gastrointestinal tract.

-ase

A suffix used in chemistry to denote enzymes, which are proteins that catalyze biochemical reactions.