Netflicks, Inc

question 61

Multiple Choice

Netflicks, Inc. has a beta of 3.61. If the market return is expected to be 13.2 percent and the risk-free rate is 7 percent, what is Netflicks' risk premium?

• A)20.91 percent
• B)22.38 percent
• C)25.72 percent
• D)29.38 percent

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Definitions:

National Exchange

A formal marketplace where securities, commodities, derivatives, and other financial instruments are traded.

CBOE

Chicago Board Options Exchange, the largest options exchange in the world, known for trading options and other securities.

Listed Call Option

An option that gives the holder the right, but not the obligation, to buy a specified amount of an underlying security at a specified price within a specified time period, traded on a formal exchange.

Exercise Price

The cost at which the possessor of an option is able to purchase (in the case of a call option) or dispose of (in the case of a put option) the underlying asset.