The two components that make up the risk-free rate are

Related MCQs

• The risk-free rate and the expected market rate of return are 0.06 and 0.12, respectively. According to the capital asset pricing model (CAPM), the expected rate of return on security X with a beta of 1.2 is equal to
• The risk-free rate and the expected market rate of return are 0.056 and 0.125, respectively. According to the capital asset pricing model (CAPM), the expected rate of return on a security with a beta of 1.25 is equal to
• What are the components in determining the real rate of return?
• What is the price of a stock estimated to pay a dividend of Rs.60 next year, if the dividend growth rate is 5% and the appropriate discount rate is 8%?
• Which of the following is/are true if a firm has a required rate of return equal to the ROE? I. The amount of earnings retained by the firm does not affect market price or the P/E. II. The firm can increase market price and P/E by increasing the growth rate. III. The P/E ratio is inversely proportional to the ROE of the firm.
• What is the risk-free rate in an environment where the real rate is 3% and inflation is running at 3%? Use either method found in chapter one.
• An Investor can form a portfolio that lies to the right of the optimal risky portfolio on asset allocation line by I. Lend some money at the risk free rate and invest the remainder in the optimal risky portfolio. II. Borrow some money at the risk free rate and invest in the optimal risky portfolio III. Such a portfolio cannot be formed IV. Invest only in risky assets
• Historically, the real rate of return in the U.S. economy has been
• If generally interest rates in nation increase, a corporate bond with a fixed interest rate will usually
• A stock has an expected return of 15 percent. The market risk premium is 10 percent and the risk-free rate is 4 percent. What is the stock's beta? (C)