White Company Stock Has a Beta of 2 and a Required

question 131

Multiple Choice

White Company stock has a beta of 2 and a required return of 23%,while Black Company stock has a beta of 1.0 and a required return of 14%.The standard deviation of returns for White Company is 10% more than the standard deviation for Black Company.The risk free rate of return according to the CAPM is

• A) 4%.
• B) 5%.
• C) 6%.
• D) Impossible to determine with the information given.

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