Suppose the Returns on Security B Are Linearly Related to Four

question 105

Multiple Choice

Suppose the returns on Security B are linearly related to four risk factors: F1,F2,F3,and F4.The required rate of return on Security B can be determined as follows:
.The risk-free rate is 5 percent.What is the risk premium for F4,if the required return of Security B is 20 percent,b1,b2,b3,and b4 are 0.5,0.7,0.6,and 0.9,respectively,and F1,F2,and F3 are 4.25 percent,5.75 percent,and 6.5 percent,respectively?

• A) 4.95%
• B) 5.50%
• C) 7.42%
• D) 11.06%

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Definitions:

Hippocampus

A crucial structure within the brain's limbic system, involved in memory formation, organization, and retrieval.

Long-term Memory

A component of memory capable of storing vast amounts of information for very long durations, sometimes a lifetime.

Temporal Lobe

A region of the brain responsible for processing auditory information and encoding memory, among other functions.

Anterograde Amnesia

A loss of the ability to create new memories after the event that caused the amnesia, leading to an inability to recall recent events.