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:

Underapplied

A condition where allocated manufacturing overhead for a period is less than the actual overhead incurred, causing unabsorbed overhead costs.

Job-Order Costing System

A cost accounting system that assigns costs to specific batches or job orders, making it easier to track the cost of producing each item or batch.

Overapplied

Occurs when the allocated manufacturing costs exceed the actual manufacturing costs incurred.

Underapplied

Refers to a situation where the allocated or applied costs in an accounting period are less than the actual costs incurred.