Use the Information for the Question(s)below

question 124

Multiple Choice

Use the information for the question(s) below.
Suppose that the risk-free rate is 5% and the market portfolio has an expected return of 13% with a volatility of 18%.Monsters Inc.has a 24% volatility and a correlation with the market of .60,while California Gold Mining has a 32% volatility and a correlation with the market of -.7.Assume the CAPM assumptions hold.
-Monsters' required return is closest to:

• A)10.0%.
• B)13.0%.
• C)11.5%.
• D)15.5%.

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Definitions:

Cohen

Often refers to statistical power analysis methods or effect size measures designed by Jacob Cohen, used in hypothesis testing.

Alpha

A threshold value used in hypothesis testing that determines the level of significance, often set at 0.05.

Type I Error

A Type I error occurs in hypothesis testing when a true null hypothesis is incorrectly rejected, falsely indicating a significant effect or difference when there is none.

Significance Level

The probability of rejecting the null hypothesis in a statistical test when it is actually true, typically denoted as alpha.