1. The current risk-free rate of return is 3.5% and the market risk premium is 4%. If the beta coefficient associated with a firm’s stock is 1.7, what is the stock’s required rate of return?
4.0%
5.6%
8.1%
10.3%
13.0%
2. Which type of risk that is associated with investments can be diversified away under the right conditions?
Systematic risk
Market risk
Inflation risk
Idiosyncratic risk
More than one of these risks can be diversified away.