USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 7

Multiple Choice

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Jonathan Crowley is a portfolio manager for a large pension fund. Last year his portfolio had an actual return of 12.6 percent with a standard deviation of 13 percent and a beta of 1.3. The market risk premium for this period of time was 6 percent, and the risk-free rate of return was 5 percent.
-Refer to Exhibit 7.6. Based on the Capital Asset Pricing Model (CAPM) , what is the required rate of return for this portfolio?

• A) 6.3 percent
• B) 7.8 percent
• C) 10.6 percent
• D) 12.8 percent
• E) 15.4 percent

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Definitions:

External Validity

The extent to which the results of a study can be generalized to other situations and to other people.

Multiple Act Criterion

A standard in social and behavioral research that emphasizes judging behaviors or actions based on a series of observations, rather than a single instance.

Thurstone Scale

A psychometric scale developed by Louis Thurstone to measure attitudes, consisting of statements about a particular issue with varying degrees of agreement or disagreement.

Dimension of Measurement

A specific aspect, property, or characteristic that can be measured or quantified.