Use the Security Market Line to Determine the Required Rate

question 63

Multiple Choice

Use the security market line to determine the required rate of return for the following firm's stock.The firm has a beta of 1.25,the required return in the market place is 10.50%,the standard deviation of returns for the market portfolio is 25.00%,and the standard deviation of returns for your firm is also 25.00%.

• A)13.13%
• B)10.50%
• C)31.25%
• D)There is not enough information to answer this question.

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Definitions:

Cost-Benefit Analysis

A method of evaluating the relative advantages and disadvantages of a project or decision by quantifying its costs and benefits.

Labour Laws

The collection of laws and regulations governing employment, work conditions, and workers' rights.

Level of Expertise

The degree of knowledge or skill in a particular area, which varies among individuals and affects their ability to perform tasks or solve problems.

Cost Overruns

Expenses exceeding the initial budget in a project, often resulting in financial challenges or the need for additional funding.