Stock X and the "Market" Have Had the Following Rates

question 5

Multiple Choice

Stock X and the "market" have had the following rates of returns over the past four years. 58% of your portfolio is invested in Stock X and the remaining 42% is invested in Stock Y.The risk-free rate is 7.68% and the market risk premium is also 7.68%.You estimate that 15.97% is the required rate of return on your portfolio.What is the beta of Stock Y?

• A) 1.06
• B) 1.12
• C) 1.22
• D) 1.11
• E) 0.86

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Definitions:

Difference-In-Differences

A statistical technique used in econometrics and quantitative research to determine the effect of a specific intervention or treatment by comparing the before-and-after differences in outcomes between a control group and a treatment group.

Causal Effects

The relationship or impact that one variable has in directly changing the value or outcome of another variable.

Policy

A course or principle of action adopted or proposed by an organization or individual.

Causation

The relationship between cause and effect where one event directly results in another.