The Beta of Elsenore, Inc

question 58

Multiple Choice

The beta of Elsenore, Inc., stock is 1.6, whereas the risk-free rate of return is 8 percent. If the expected return on the market is 15 percent, then what should investors expect as a return on Elsenore?

• A) 11.20%
• B) 19.20%
• C) 24.00%
• D) 32.00%

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Definitions:

Capital Fund

A fund created for the purpose of undertaking capital projects or investing in long-term assets, funded by capital expenditures or external financing sources.

General Fund

The primary operating fund of a government, covering general operations and services not accounted for in special-purpose funds.

Direct Increase

A rise in the value or quantity of something without intervening steps or intermediaries.

Endowment Fund

A fund where the principal amount is kept intact while the investment income is available for use, typically for the ongoing support of an organization.