Suppose That Google Stock Has a Beta of 1

question 10

Multiple Choice

Suppose that Google Stock has a beta of 1.06 and Boeing stock has a beta of 1.31.If the risk-free interest rate is 4% and the expected return from the market portfolio is 12%,then the expected return on a portfolio that consists of 30% Google stock and 70% Boeing stock is closest to:

• A) 12.5%
• B) 13.1%
• C) 13.5%
• D) 13.9%

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Definitions:

Perpetuity

A financial instrument that pays a fixed amount of cash flow indefinitely.

Compounded Annually

Involves the calculation and addition of interest to the principal sum of a loan or deposit once every year.

Compounded Quarterly

A method where interest is added to the principal every three months which allows interest to be earned on the previously accumulated interest.

Scholarships

Financial support awarded to students based on academic or other achievements to help fund their education.