Alpha Stock Has a Beta of 1

question 3

Multiple Choice

Alpha stock has a beta of 1.43.The risk-free rate of return is 3.5 percent and the market rate of return is 11 percent.What is the amount of the risk premium on Alpha stock?

• A)5.24%
• B)5.50%
• C)7.50%
• D)8.77%
• E)10.73%

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Definitions:

Shale

A fine-grained sedimentary rock formed from clay and mud, often used as a source of oil and natural gas.

Diagenesis

The physical, chemical, and biological changes that sediment undergoes after initial deposition, excluding surface erosion and deep metamorphism.

Talus

Loose rock fragments upon a steep slope, or an accumulation of such fragments.

Carbonate Rocks

Sedimentary rocks primarily composed of carbonate minerals, typically formed in marine environments.