Estimating the Rate of Return for Any Portfolio Lying on the Security

question 45

Multiple Choice

Estimating the rate of return for any portfolio lying on the security market line requires which of the following?

• A)Market rate of return and the portfolio beta
• B)Market rate of return,market beta,and the risk-free rate
• C)Risk-free rate,factor beta,and the industry beta
• D)Factor beta and the market risk premium
• E)Portfolio beta,the risk-free rate,and the market risk premium

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Definitions:

Variable Factors

Inputs to production that can be adjusted in the short run, such as labor and raw materials.

Fixed Costs

Costs that do not change with the level of production or sales, such as rent, salaries, or insurance, and must be paid regardless of business activity.

Industry Supply Curve

The industry supply curve represents the total quantity of goods that producers in a market are willing and able to sell at different prices, assuming all other factors constant.

Output

The cumulative production of goods or services by a corporation, industry, or the entire economy.