Exhibit 7-6 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)

question 7

Multiple Choice

Exhibit 7-6
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)
Jonathan Crowley is a portfolio manager for a large pension fund. Last year his portfolio had an actual return of 12.6% with a standard deviation of 13% and a beta of 1.3. The market risk premium for this period of time was 6% and the risk-free rate of return was 5%.
-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%
• B) 7.8%
• C) 10.6%
• D) 12.8%
• E) 15.4%

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Definitions:

Price Floor

A minimum price set by the government for certain goods and services, which cannot legally be lowered.

Temporary Surplus

A short-term situation where the supply of a product or service exceeds its demand, often leading to price reductions.

Permanent Surplus

A situation where a country consistently exports more goods and services than it imports, leading to a positive balance of trade over time.

Equilibrium Price

The price at which the quantity of a product or service demanded by consumers matches the quantity supplied by producers, leading to a balance in the market.