Use the Information for the Question(s) Below

question 76

Multiple Choice

Use the information for the question(s) below.
Suppose the market portfolio's excess return tends to increase by 30% when the economy is strong and decline by 20% when the economy is weak. A type S firm has excess returns increase by 45% when the economy is strong and decrease by 30% when the economy is weak. A type I firm will also have excess returns of either 45% or -30%, but the type I firm's excess returns will depend only upon firm-specific events and will be completely independent of the state of the economy.
-Suppose that Luther Corporation's beta is 0.9.If the market risk premium is 8% and the risk-free interest rate is 4%,then then expected return for Luther stock is:

• A) 7.6%
• B) 11.6%
• C) 11.2%
• D) 12.9%

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Definitions:

Femur

The longest and strongest bone in the human body, extending from the hip to the knee.

Sternum

is the long flat bone located in the center of the chest, connecting the rib bones and serving as a support for the upper body.

Vertebra

One of the individual bones that stack to form the vertebral column (spine), providing structural support and housing spinal cord pathways.

Left Ribs

Refers specifically to the ribs on the left side of the body, which protect the thoracic cavity and support the respiratory system.