The Risk-Free Rate of Return Is 4% and the Market

question 119

Multiple Choice

The risk-free rate of return is 4% and the market risk premium is 8%. What is the expected rate of return on a stock with a beta of 1.28?

• A) 9.12%
• B) 10.24%
• C) 13.12%
• D) 14.24%
• E) 15.36%

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Definitions:

Future Profits

Expected gain in financial terms that a business anticipates receiving over a forthcoming period, based on current strategies, market conditions, and operations.

Hiring Labor

The process of finding, evaluating, and employing individuals to work for a business or organization.

Payment Stream

A sequence of payment installments made over a period of time, often associated with loans or annuities.

Rented Capital

The use of assets or equipment by a firm for a period of time in exchange for payment without owning them.