Consider an Asset That Has a Beta of 1

question 21

Multiple Choice

Consider an asset that has a beta of 1.5.The return on the risk-free asset is 6.5% and the expected return on the stock index is 15%.The estimated return on the asset is 20%.Calculate the alpha for the asset.

• A) 19.25%
• B) 0.75%
• C) -0.75%
• D) 9.75%
• E) 9.0%

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Definitions:

25th Percentile

Represents the value below which 25% of the data points in a dataset fall.

Global War

A conflict involving major parts of the world; often involves multiple countries across different continents.

Waterboarding

A form of torture in which water is poured over a cloth covering the face and breathing passages of an immobilized captive, causing the individual to experience the sensation of drowning.

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Financial assets whose value has fallen significantly and for which there is no longer a functioning market, making them difficult to sell without incurring a loss.