Asset P Has a Beta of 0

question 55

Multiple Choice

Asset P has a beta of 0.9. The risk-free rate of return is 8 percent, while the return on the market portfolio of assets is 14 percent. The asset's required rate of return is ________.

• A) 13.4 percent
• B) 22.0 percent
• C) 15.4 percent
• D) 6.0 percent

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Definitions:

Collateral

Property or assets pledged as security for repayment of a loan, subject to seizure by the lender in case of default.

Legally Enforceable

A term describing an agreement or contract that is recognized by legal authorities and can be upheld in court.

Security Interest

A legal claim or lien on collateral that has been pledged, usually to secure a debt or loan, affording the lender a right to repossession if the debtor defaults.

Debtor's Property

Assets owned by an individual or entity (debtor) that owe money to creditors, which may be subject to claims or liens.