Learning: Gap Filler: Basic Math $2$

QUESTION $($

One of the principle truths in finance is that there is a risk to return

tradeoff. Investors will demand higher returns to invest in higher risk

investments. One measure of risk is called beta. When an asset's $($e$.$g$.,$

common stock$)$ beta increases the required return will increase

proportionately.

Assume the following relationship holds: Required return beta $x$

$(12\%).$ What is the required return for a stock with a beta of $1\mathrm{.}6?$

ANSWER

$1\mathrm{.}6\%$

$12\mathrm{.}0\%$

$19\mathrm{.}2\%$

$22\mathrm{.}2\%$

IDON'T KNOWYET