Stock Y Has a Beta of 0

question 61

Multiple Choice

Stock Y has a beta of 0.8 and a required rate of return of 10 percent.What is the market risk premium if the risk-free rate is 5 percent?

• A) 5.00%
• B) 4.75%
• C) 6.25%
• D) 7.50%

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Definitions:

Equity Method

An accounting technique used by firms to assess the profits earned by their investments in other companies, by recording profits proportional to their ownership percentage.

Inventory

Assets held for sale in the ordinary course of business, in the process of production for such sale, or in the form of materials or supplies to be consumed in the production process or in rendering services.

Journal Entry

A record in accounting that notes the debit and credit transactions affecting the financial statements of a business.

Significant Influence

A concept in accounting and finance where an investor has the power to participate in, but not control, the financial and operating policy decisions of an investee.