Stock A has beta equal to 2 while stock B has beta equal to 4. An equally weighted portfolio of the two stocks has an expected return of 10%. This is consistent with？ A. A risk premium of 4% and a risk free rate of 1% B. A risk premium of 3% and a risk free rate of 0 C. A risk premium of 3% and a risk free rate of 1% D. A risk premium of 3% and a risk free rate of 3%

Stock A has beta equal to 2 while stock B has beta equal to 4. An equally weighted portfolio of the two stocks has an expected return of 10%. This is consistent with？ A. A risk premium of 4% and a risk free rate of 1% B. A risk premium of 3% and a risk free rate of 0 C. A risk premium of 3% and a risk free rate of 1% D. A risk premium of 3% and a risk free rate of 3%

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter2: Risk And Return: Part I

Section: Chapter Questions

Problem 14P: You have observed the following returns over time: Assume that the risk-free rate is 6% and the...

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Question

Stock A has beta equal to 2 while stock B has beta equal to 4. An equally weighted portfolio of the two stocks has an expected return of 10%. This is consistent with？

A. A risk premium of 4% and a risk free rate of 1%

B. A risk premium of 3% and a risk free rate of 0

C. A risk premium of 3% and a risk free rate of 1%

D. A risk premium of 3% and a risk free rate of 3%

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