In the CAPM, a Stock Has a Beta Coefficient of 0.5.The

question 19

Multiple Choice

In the CAPM, a stock has a beta coefficient of 0.5.The average returns to all stocks in the market is 8%.If the interest rate on three-month T-bills is at around 3 percent, what is the expected return to this stock? Assume that unsystematic risk is zero.

• A)2.5 percent
• B)3.5 percent
• C)5.5 percent
• D)7.0 percent

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Definitions:

Capital Intensity Ratio

The capital intensity ratio measures the amount of capital needed per dollar of revenue; a higher ratio indicates that more assets are needed to generate income.

2018 Data

Information or statistics from the year 2018, typically used for analytical or comparison purposes.

Excess Capacity Scenario

A situation in which a company or economy can produce more goods or services than currently being produced without incurring additional costs.