The Expected Return for a Stock, Calculated Using the CAPM

question 18

Multiple Choice

The expected return for a stock, calculated using the CAPM, is 10.5 percent. The market return is 9.5 percent, and the beta of the stock is 1.50. Calculate the implied risk-free rate.

• A) 7.50 percent
• B) 13.91 percent
• C) 17.50 percent
• D) 21.88 percent
• E) 14.38 percent

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Definitions:

Sphenoid

Wedge-shaped.

Appendicular Skeleton

The portion of the skeleton that includes the bones of the limbs and the supporting bone girdles (pectoral and pelvic) that connect them to the central body, or axial, skeleton.

Limbs

Extremities of the body used for movement and interaction with the environment, such as arms and legs in humans.

Girdles

Structures that connect the limbs to the axial skeleton, including the pelvic girdle and shoulder girdle.