The Expected Market Return Is 9 Percent

question 8

Multiple Choice

The expected market return is 9 percent. The risk-free rate of return is 1 percent, and XYZ Co. has a beta of 1.4. The risk premium is

• A) 8 percent.
• B) 11.2 percent.
• C) 12.2 percent.
• D) 10.3 percent

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Definitions:

Values

The importance, worth, or usefulness of something, or a set of beliefs or standards of behavior.

Null Hypothesis

A statement suggesting that there is no significant difference or relationship between specified populations, any observed effect is due to sampling or experimental error.

Statistical Hypothesis

Statement about an expected outcome or relationship involving population parameters.

Expected Outcome

The anticipated result or set of results from a scientific experiment or a statistical analysis.