What Is the Expected Risk-Free Rate of Return If Asset

question 156

Multiple Choice

What is the expected risk-free rate of return if asset X, with a beta of 1.5, has an expected return of 20 percent, and the expected market return is 15 percent?

• A) 5.0%
• B) 7.5%
• C) 15.0%
• D) 22.5%

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Definitions:

Intrinsic Value

The inherent worth of a financial asset, determined through fundamental analysis without reference to its market value.

Strike Price

The specified price at which the holder of an option can buy (in the case of a call option) or sell (in the case of a put option) the underlying security or commodity.

Call Premium

The additional amount above the bond's face value that must be paid to redeem it before its maturity date.

Intrinsic Value

The actual, inherent value of a financial asset, determined through fundamental analysis without reference to its market value.