90.2K

Verified Solution

Link Copied!

Last year, Rocket Inc. earned a 18% return. Farmer's Corp. earned 10%. The overall market return last year was 16%, and the risk-free rate was 2%. If Rocket stock has a beta of 1.9 and Farmer's has a beta of 0.5, which stock performed better once you take risk into account? Rocket's expected return is %. (Enter as a percentage and round to one decimal place.) Farmer's expected return is %. (Enter as a percentage and round to one decimal place.) Which stock performed better once you take risk into account? (Select the best answer below.) O A. Given its beta, Rocket should have earned a much lower return than it did (10% vs 9.0%). Farmer's, on the other hand, earned a higher return than we would have expected (18% vs 28.6%). So taking risk into account, Rocket was the better stock. O B. Given its beta, Rocket should have earned a much higher return than it did (28.6% vs 18%). Farmer's, on the other hand, earned a lower return than we would have expected (9.0% vs 10%). So taking risk into account, Rocket was the better stock. OC. Given its beta, Rocket should have earned a much higher return than it did (28.6% vs 18%). Farmer's, on the other hand, earned a higher return than we would have expected (10% vs 9.0%). So, taking risk into account, Farmer's was the better stock. OD. Given its beta, Rocket should have earned a much higher return than it did (10% vs 18%). Farmer's, on the other hand, earned a higher return than we would have expected (28.6% vs 9.0%). So taking risk into account, Rocket was the better stock

Answer & Explanation Solved by verified expert

See Answer