The Current Risk-Free Rate of Return in the Economy Is

question 52

Essay

The current risk-free rate of return in the economy is 6.5%. In addition, the market rate of return is currently 10%. Given that a company's expected return on common stock is 12.5% what is the company's systemic risk level (beta)? Show your calculations. In addition, describe systemic risk.

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Definitions:

Parol Evidence

The rule that prohibits the use of oral statements or agreements to contradict or vary the terms of a written contract.

Integrated Contract

A written contract intended to be the complete and final representation of the parties’ agreement.

Written Contracts

Legally binding agreements that are recorded in writing rather than agreed upon orally or implied by conduct.

English Law

The legal system of England and Wales, which is based on common law principles, statutes, and legal precedents.