Your Estimate of the Market Risk Premium Is 6

question 54

Multiple Choice

Your estimate of the market risk premium is 6%. The risk-free rate of return is 4%, and General Motors has a beta of 1.6. According to the Capital Asset Pricing Model (CAPM) , what is its expected return?

• A) 12.2%
• B) 12.9%
• C) 13.6%
• D) 14.3%

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Definitions:

Mixers

Devices used to blend or combine ingredients together, often found in kitchens or for industrial purposes.

Average Fixed Cost

The fixed costs of production (costs that do not change with output level) divided by the quantity of output produced.

Range of Output

The spectrum of production levels within which a firm operates, from minimum to maximum capacity.

Mixers

Devices used to blend, beat, or whip ingredients together into a coherent mixture.