If the All-Ordinaries Has a Beta with Respect to the World

question 1

Multiple Choice

If the All-Ordinaries has a beta with respect to the world market of 1.2,and the world market return and risk-free rate are 12% and 6% respectively,then the expected return predicted by the ICAPM for Australia is:

• A) \( 8.8 \% \)
• B) \( 10.6 \% \)
• C) \( 12.8 \% \)
• D) \( 13.2 \% \)

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Definitions:

Annual Return

The percentage of change in an investment's value over a one-year period, including any dividends or interest earned.

Factory Overhead

All indirect costs associated with manufacturing, excluding direct materials and direct labor expenses.

Period Cost

Costs that are not directly tied to the production process and are expensed in the period they are incurred.