Security I Has a Beta of 1

question 24

Multiple Choice

Security I has a beta of 1.3,the risk-free rate is 4%,and the expected market risk premium is 11%.What is the expected return for Security I?

• A) 15.0%
• B) 18.3%
• C) 14.6%
• D) 13.1%

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Definitions:

Cash Flows

Refers to the streams of incoming and outgoing cash transactions resulting from a company's operational, investing, and financing activities.

Future Value

The value of an investment at a specific future date, considering compound interest or returns.

Interest Rate

The cost of borrowing money or the compensation for the service and risk of lending money, expressed as a percentage of the principal loan amount.

Cash Flows

The movement of funds into and out of a business, project, or financial product, reflecting operational, investment, and financing activities.