QUESTION 15

Part A: Johnsun Inc's stock has a beta of 1.40, and its required return is 13.0%. Adelphis stock has a beta of 0.80. If the risk-free rate is 4.0%, what is the required rate of return on Adelphis stock?

a. 7.7%

b. 8.0%

c. 8.3%

d. 8.6%

e. 9.1%

Part B:Which one of the following is the best example of systematic risk?

A.Discovery of a major gas field

B.Decrease in textile imports

C.Increase in agricultural exports

D. Decrease in gross domestic product

E. Decrease in management bonuses for banking executives