You Own $10,000 of Denny's Corp

question 73

Multiple Choice

You own $10,000 of Denny's Corp. stock that has a beta of 3.2. You also own $15,000 of Qwest Communications (beta = 1.9) and $15,000 of Southwest Airlines (beta = 0.4) . Assume that the market return will be 13 percent and the risk-free rate is 5.5 percent. What is the risk premium of the portfolio?

• A) 10.51 percent
• B) 11.49 percent
• C) 12.45 percent
• D) 13.62 percent

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Definitions:

Value in Exchange

The worth of a good or service in comparison to other goods or services in the context of trade or commerce.

Marginal Utility

The extra pleasure or advantage gained from using an additional unit of a product or service.

Dozen Oysters

A quantity of twelve oysters, often used as a standard unit of sale in seafood markets.

Total Utility

The total satisfaction received from consuming a particular amount of goods or services.