The SML Is 7% + 6% (Beta)

question 53

Multiple Choice

The SML is 7% + 6% (Beta) . Your stock has a Beta of .9 and an implied rate of return of 15%. Your stock

• A) has a negative rate of return.
• B) has a riskfree rate of return of 12.4%.
• C) has a positive alpha of 2.6%.
• D) has a negative alpha of 2.6%.

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Definitions:

Product Innovations

Refers to the introduction of a new or significantly improved product or service that meets new requirements or satisfies existing market needs.

Incremental Improvements

Small, continuous enhancements made to a product or process over time, aiming for better efficiency or performance.

R&D Expenditures

Research and Development (R&D) Expenditures refer to the funds allocated by businesses or governments towards the investigation and development of new products, processes, or services.

Scientific Research

The systematic investigation into and study of materials and sources in order to establish facts and reach new conclusions, typically involving controlled experiments or observational studies.