Which One of the Following Should Earn the Most Risk

question 18

Multiple Choice

Which one of the following should earn the most risk premium based on CAPM?

• A)diversified portfolio with returns similar to the overall market
• B)stock with a beta of 1.38
• C)stock with a beta of 0.74
• D)U.S. Treasury bill
• E)portfolio with a beta of 1.01

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Definitions:

Significant Influence

The power to participate in the financial and operating policy decisions of another entity without having full control or joint control.

Fair Value Option

An accounting option allowing financial assets and liabilities to be recorded at their fair value, with changes in fair value recognized in the income statement.

Balance Sheet

A financial statement that displays a company's financial position at a specific point in time, detailing assets, liabilities, and shareholders' equity.

Income Statement

A financial report that shows a company's revenues, expenses, and net income over a specific period.