The Market Expected Return Is 14 Percent with a Standard

question 71

Multiple Choice

The market expected return is 14 percent with a standard deviation of 12 percent.The risk-free rate is 5.5 percent.Security A has just paid a dividend of $1.50,which is expected to grow at a rate of 10 percent per year indefinitely.What is the current price of Security A if it has a beta of 1.4?

• A) $9.93
• B) $10.93
• C) $20.27
• D) $22.30

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Definitions:

Test of Independence

An analytical method designed to assess if a significant link exists between two categorical variables.

McNemar Test

A method of statistical examination for paired nominal data aimed at evaluating the equality of marginal frequencies across rows and columns.

Nonparametric Statistics

Statistical methods that do not assume a particular distribution of the data and are used especially for data that is not normally distributed.

Small Sample Sizes

This term relates to studies or experiments that involve a limited number of observations or data points, which can affect the reliability and generalizability of the results.