Given a Risk-Free Rate of Return of 4 Percent, a Beta

question 10

Multiple Choice

Given a risk-free rate of return of 4 percent, a beta of 1.5, and a return on the market portfolio of 12 percent, what is the required rate of return using the CAPM?

• A)16%
• B)12%
• C)24%
• D)8%

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Definitions:

Marginal Cost

The expenditure required to produce one more unit of a product or service.

Quantity Supplied

The amount of a good or service that producers are willing and able to sell at a particular price over a given period of time.

Marginal Revenue

The extra revenue gained by the sale of an additional unit of a product or service.

Total Revenue

The total amount of income generated by the sale of goods or services by a company.