Consider an Asset That Has a Beta of 1

question 12

Multiple Choice

Consider an asset that has a beta of 1.5. The return on the risk-free asset is 6.5 percent and the expected return on the stock index is 15 percent. The estimated return on the asset is 20 percent. Calculate the alpha for the asset.

• A) 19.25 percent
• B) 0.75 percent
• C) -0.75 percent
• D) 9.75 percent
• E) 9.0 percent

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Definitions:

Minimum

The lowest value in a data set.

Maximum

The highest or greatest amount, value, or level that can be achieved or recorded.

Anomalous Data

Data that appear suspicious or are not anticipated by a researcher.

Analyzing Them

Refers to the process of examining various components systematically to understand their nature, function, or meaning.