Asked by Destinee Miller on Jul 07, 2024
Verified
Lear Corp. has an expected excess return of 8% next year. Assume Lear's beta is 1.43. If the economy booms and the stock market beats expectations by 5%, what was Lear's actual excess return?
A) 7.15%
B) 13%
C) 15.15%
D) 18.59 %
Expected Excess Return
The return expected on an investment over and above the risk-free rate, taking into account both the risk involved and the time value of money.
Beta
A measure of a stock's volatility in relation to the overall market; it indicates the risk associated with a particular equity in comparison to the market as a whole.
- Acquire knowledge and utilize the concept of the Sharpe ratio in the analysis of investment performance.
Verified Answer
SB
Learning Objectives
- Acquire knowledge and utilize the concept of the Sharpe ratio in the analysis of investment performance.