The Stock of Alpha Company Has an Expected Return of 18

question 85

Multiple Choice

The stock of Alpha Company has an expected return of 18% and a beta of 1.5,and Gamma Company stock has an expected return of 15.6% and a beta of 1.2.Assume the CAPM holds.What's the risk-free rate?

• A) 8.0%
• B) 6.0%
• C) 0%
• D) 4.7%

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Definitions:

Sold Units

The number of units of product that have been sold to customers.

Contribution Margin Ratio

The percentage of sales revenue remaining after variable costs are deducted, indicating the portion contributing towards fixed costs and profit.

Contribution Format

An income statement format that separates fixed and variable costs to highlight the contribution margin.

Income Statement

A summary of a company's financial performance over a certain period, detailing revenue, expenses, and profits or losses, revealing the company's ability to generate profit.