The Risk Free Rate Is 2

question 101

Multiple Choice

The risk free rate is 2%.The expected rate of return on the market is 12%.Beta and the expected rate of return for four stocks are as follows.: ABC .8 , 10%; DEF 1, 12%; GHI 1.2 , 13%, and JKL 2, 22%.Which of these stocks should not be purchased?

• A)ABC
• B)DEF
• C)GHI
• D)JKL

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Definitions:

Stockholders' Equity

The portion of a company's assets that belongs to the shareholders, calculated as total assets minus total liabilities.

Net Assets

The difference between total assets and total liabilities, representing the owner's equity in a company.

Residual Interest

The remaining interest in assets after all other claims have been satisfied, often related to securitization transactions.

Expected Exit Value

The anticipated amount to be received from an investment at the point of exit, such as selling an asset or closing a position.