Use the Following Information to Answer the Question(s)below

question 83

Multiple Choice

Use the following information to answer the question(s) below.
Suppose that the market portfolio is equally likely to increase by 24% or decrease by 8%.Security "X" goes up on average by 29% when the market goes up and goes down by 11% when the market goes down.Security "Y" goes down on average by 16% when the market goes up and goes up by 16% when the market goes down.Security "Z" goes up on average by 4% when the market goes up and goes up by 4% when the market goes down.
-The expected return on security with a beta of 0.8 is closest to:

• A)0.0%
• B)3.2%
• C)6.4%
• D)7.2%

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Definitions:

Compounded Annually

The method of calculating interest where the total interest is added to the principal once per year, resulting in interest earning interest annually.

Perpetuity

A type of annuity that pays a fixed sum of money to an individual indefinitely.

Compounded Quarterly

Compounded Quarterly is a method of calculating interest where the interest earned over a quarter is added to the principal, and the subsequent interest calculation will include the previously earned interest.

Deferral Period

A span of time during which payments, especially loan or insurance premiums, are postponed.