What must the risk-free rate be

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Reference no: EM131897673

1. Random price movements (i.e. unpredictable price changes) indicate that ________.

(a) investors are irrational

(b) technical analysis to uncover trends can be quite useful

(d) markets are functioning efficiently

2. A stock has an expected return of 22 percent (according to the CAPM theory), and a beta of 1:6. The expected return on the market is 16 percent. What must the risk-free rate be?

(a) 4%

(b) 5%

(d) 7%

Reference no: EM131897673

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