1a) Big Boom stock has a beta of 1.46. The risk-free rate of return is 3.07% and the expected market rate of return is 11.81%. What is the amount of the risk premium on Big Boom stock?

a) 12.76%

b) 10.25%

c) 8.09%

d) 9.59%

e) 17.24%

1b) If a firm's stock price follows a random walk, the price today is said to be equal to the prior period price plus the expected return for the period with any remaining difference from the actual return considered to be:

a) a predictable amount based on the past prices.

b) related to the security's risk.

c) related to the risk-free rate.

d) due to new information related to the stock.

e) an overall market abnormality.