The Stock of Alpha Company Has an Expected Return of 18

question 27

Multiple Choice

The stock of Alpha Company has an expected return of 18% and a beta of 1.5,and Gamma Company stock has an expected return of 15.6% and a beta of 1.2.Assume the CAPM holds.What's the risk-free rate?

• A) 8.0%
• B) 6.0%
• C) 0%
• D) 4.7%

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Definitions:

Postretirement Benefit Expense

The cost incurred by an employer to provide non-pension postretirement benefits such as health care to retired employees, recognized during the period in which the employees render services.

Actual Return

The real profit or loss generated on an investment over a specific period, reflecting the difference between the ending value and the beginning value, adjusted for dividends and interest.

Plan Assets

Assets set aside in a separate fund by an employer to pay pension benefits, typically including investments in stocks, bonds, and other securities.

Economic Status

Economic Status refers to the position of an individual, group, or country in terms of financial and resource aspects, influencing living standards and opportunities.