Asset Y Has a Beta of 1

question 142

Multiple Choice

Asset Y has a beta of 1.2. The risk-free rate of return is 6 percent, while the return on the market portfolio of assets is 12 percent. The asset's market risk premium is ________.

• A) 7.2 percent
• B) 6.0 percent
• C) 13.2 percent
• D) 10 percent

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Definitions:

Compounded Annually

This refers to the process of calculating interest on both the initial principal and the accumulated interest from previous periods on a yearly basis.

Retire

To withdraw from one's position or occupation; to conclude one's working or professional career.

Present Value

Present value is a financial concept that calculates the current worth of a future sum of money or stream of cash flows, given a specified rate of return.