The Stock of Alpha Company Has an Expected Return of 15.5

question 9

Multiple Choice

The stock of Alpha Company has an expected return of 15.5% and a beta of 1.5,and Gamma Company stock has an expected return of 13.4% and a beta of 1.2.Assume the CAPM holds.What's the expected return on the market?

• A) 12%
• B) 7%
• C) 10.3%
• D) 11.2%

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Definitions:

Standard Deviations

A measure used in statistics to quantify the amount of variation or dispersion of a set of values.

Strong-Form Efficient

A form of market efficiency that asserts all information, public and private, is fully reflected in stock prices, negating any insider advantages.

Historical Prices

Historical prices refer to the recorded prices or values of an asset or investment over previous time periods, serving as a data point for analyzing trends.