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:

Warehousemen's Liens

Legal claims that a warehouse operator can place on goods stored in their facility for unpaid storage fees or services.

UCC

Short for Uniform Commercial Code, it is a comprehensive set of laws governing all commercial transactions in the United States.

Carriers' Liens

Legal claims that allow carriers (e.g., transportation or shipping companies) to retain possession of goods until the transportation charges are paid by the consignor or consignee.

Right of Redemption

The legal right of a debtor, particularly a mortgagor, to reclaim their property by paying the debt, usually after a foreclosure.