1. A stock has an expected return of 18 percent, its beta is 1.4, and the expected return on the market is 14 percent. What must the risk-free rate be? (Do not round your intermediate calculations.)
4.16%
-1.60%
4.00%
3.80%
4.20%
2. A news flash just appeared that caused about a dozen stocks to suddenly drop in value by 20 percent. What type of risk does this news flash best represent?
Non diversifiable
Unsystematic
Total
Portfolio
Market