Use the Following Information to Answer the Question(s)below

question 24

Multiple Choice

Use the following information to answer the question(s) below. The volatility of the market portfolio is 10%,the expected return on the market is 12%,and the risk-free rate of interest is 4%.
-The expected return on the portfolio of the three stocks is closest to:

• A)10.0%.
• B)11.4%.
• C)11.8%.
• D)12.0%.

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Definitions:

ROE

Return on Equity, a measure of a corporation's profitability that reveals how much profit a company generates with the money shareholders have invested.

Expected Earnings

The forecasted income of a company, often used by investors to gauge the company's future profitability.

Common Shareholders' Equity

The amount of money that would be returned to shareholders if all the company's assets were liquidated and all its debts paid off.

Replacement Cost

The cost to replace an asset with another of similar kind and quality at current prices, without deduction for depreciation.