UPS, a Delivery Services Company, Has a Beta of 1

question 1

Multiple Choice

UPS, a delivery services company, has a beta of 1.6, and Wal-Mart has a beta of 0.9. The risk-free rate of interest is 6% and the market risk premium is 9%. What is the expected return on a portfolio with 40% of its money in UPS and the balance in Wal-Mart?

• A) 14.96%
• B) 15.79%
• C) 16.62%
• D) 18.28%

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Definitions:

Accounts Receivable Turnover

A financial ratio that measures how efficiently a company collects its receivables or the speed of debt collection from customers.

Average Account Receivables

The average amount of money owed to a company by its customers for goods or services delivered on credit.

Allowance Method

An accounting technique that estimates uncollectible accounts receivable as an expense, reducing the accounts receivable balance.

Outstanding Accounts Receivable

The amount of money owed to a company by its customers for goods or services delivered but not yet paid for.