Brodkey Shoes Has a Beta of 1

question 98

Multiple Choice

Brodkey Shoes has a beta of 1.30, the T-bill rate is 3.00%, and the T-bond rate is 6.5%.The annual return on the stock market during the past 3 years was 15.00%, but investors expect the annual future stock market return to be 13.00%.Based on the SML, what is the firm's required return?

• A) 13.51%
• B) 13.86%
• C) 14.21%
• D) 14.58%
• E) 14.95%

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Definitions:

Habituation

The process in which attention to novelty decreases with repeated exposure.

Classical Conditioning

Learning in which previously existing behaviors come to be elicited by new stimuli.

Goal-Directed Behavior

Refers to actions that are carried out with a specific outcome or objective in mind.

Coordination

The ability to use different parts of the body together smoothly and efficiently.