You Own Three Securities

question 12

Multiple Choice

You own three securities.Security A has an expected return of 11 percent as compared to 14 percent for Security B and 9 percent for Security C.The expected inflation rate is 4 percent and the nominal risk-free rate is 5 percent.Which one of the following statements is correct?

• A) There is no risk premium on Security C.
• B) The risk premium on Security A exceeds that of Security B.
• C) Security B has a risk premium that is 50 percent greater than Security A's risk premium.
• D) The risk premium on Security C is 5 percent.
• E) All three securities have the same expected risk premium.

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Definitions:

Internal Marketing

the promotion of a company's objectives, products, and services to its employees with the goal of aligning internal behaviors with organizational goals.

Cross-functional Teams

Groups composed of members from different departments working together towards a common goal.

External Customer Satisfaction

Measures how well a company meets the expectations of external customers, those not directly affiliated with the company.

Formal Controls

Mechanisms established to ensure that an organization's operations align with its goals and standards, including policies, procedures, and regulations.