Your Estimate of the Market Risk Premium Is 7

question 74

Multiple Choice

Your estimate of the market risk premium is 7%. The risk-free rate of return is 4%, and General Motors has a beta of 1.4. According to the Capital Asset Pricing Model (CAPM) , what is its expected return?

• A) 10.4%
• B) 11.7%
• C) 13.1%
• D) 13.8%

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Definitions:

Alcoa Case

A landmark antitrust case in the United States in which the Aluminum Company of America (Alcoa) was found to have monopolized the aluminum industry through various means, leading to significant implications for antitrust law.

Rule of Reason

A legal doctrine used in US antitrust law that determines the legality of business practices based on their actual impact on market competition.

Relevant Market

The market segment in which a particular company's product or service competes, including potential customers and competing products.

DuPont

A multinational corporation known for its development of polymers, chemicals, and agricultural products.