If the Equation E(ri)= Rf + (Rf + [E(rm)- Rf]

question 77

Multiple Choice

If the equation E(ri) = rf + (rf + [E(rm) - rf] × βi) is the linear equation for the Security Market Line,what portion represents the market risk premium for a stock that does not have a beta of 1.0?

• A)βi
• B)[E(rm)- rf]
• C)rf
• D)βi ∗ [E(rm)- rf]

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Definitions:

Total Product

The total quantity of output or goods produced by a firm or company using a given quantity of inputs during a specific time period.

Marginal Product

The additional output generated by adding one more unit of a specific input, all other inputs being held constant.

Total Product

The total quantity of output produced by a firm using a given amount of inputs.

Law Of Diminishing Returns

An economic principle stating that adding an additional factor of production results in smaller increases in output.