The Risk-Free Rate Is 5%,the Beta of Stock a Is

question 77

Multiple Choice

The risk-free rate is 5%,the beta of Stock A is 1.2,the beta of Stock B is 0.8,and the expected return on Stock A is 12.2%.What is the expected return on Stock B?

• A) 8.4%
• B) 9.2%
• C) 9.8%
• D) 11.0%
• E) 12.2%

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Definitions:

Yield

The income return on an investment, typically expressed as a percentage, indicating the interest or dividends received.

Long-Term Corporate Bonds

Bonds issued by corporations with maturities longer than ten years, offering fixed interest payments.

Eurobonds

Bonds issued in a currency other than the currency of the country or market in which it is issued, often used by companies to raise capital in foreign markets.

Yankee Bonds

Bonds issued by foreign entities in the U.S. market, denominated in U.S. dollars, to raise capital from American investors.