If the Risk Free Rate Is 4%, the Beta on Intel

question 37

Multiple Choice

If the risk free rate is 4%, the beta on Intel is 1.1, and the rate of return of the market portfolio is 12/5, what is the expected return on Intel?

• A) 12.8%
• B) 11.2%
• C) 12%
• D) 13.1

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Definitions:

Winner's Curse

A phenomenon in auctions where the winning bidder overpays due to overestimation of the item's value.

Optimistic Estimate

An estimate that assumes the most favorable conditions and outcomes for a project or investment.

Bid Shading

A strategy in which buyers deliberately bid lower than their actual valuation of the item to save costs, common in auction contexts.

Common Value Auctions

Auctions in which the item for sale has a value that is the same for all bidders, but the bidders have different information about that value.