You Own $5,000 of Software Corp's Stock That Has a Beta

question 39

Multiple Choice

You own $5,000 of Software Corp's stock that has a beta of 3.75. You also own $10,000 of Home Improvement Corp. (beta = 1.5) and $15,000 of Publishing Corp. (beta = 0.35) . Assume that the market return will be 13 percent and the risk-free rate is 4.5 percent. What is the risk premium of the portfolio?

• A) 11.05 percent
• B) 16.50 percent
• C) 17.00 percent
• D) 24.70 percent

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Definitions:

Demand Function

An equation that relates the quantity of a good demanded by consumers to its price and other factors like income and prices of related goods.

Income Elasticity

Measures how the demand for a good or service changes relative to a change in consumers' income levels.

Bagels

A dense bread product, often shaped into a ring, made from dough that is boiled before it is baked.

Demand Function

A mathematical model expressing the quantity demanded of a good or service as a function of its price, and possibly other factors.