Which Two of the Following Describe the Two Stages of Estimating

question 25

Multiple Choice

Which two of the following describe the two stages of estimating the relevant risk premium on a firm's equity?

• A) Adjust the risk premium for a typical share to suit the risk level of the particular company's shares.
• B) Compare the expected return from equities with the return provided by bonds.
• C) Assess the capital asset price.
• D) Estimate the average return demanded by investors above the risk- free return to induce them to buy average- risk shares.

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Definitions:

Merchant

An individual or business entity engaged in the buying and selling of goods for profit, typically possessing specialized knowledge in the goods traded.

Article 2

A specific section of the Uniform Commercial Code (UCC) that governs the sale of goods in the United States.

Option Contract

A contract giving the buyer the right, but not the obligation, to buy or sell an asset at a specified price within a specific time frame.

Arabian Mare

A female horse of the Arabian breed, known for its endurance, speed, intelligence, and distinctively shaped head and high tail carriage.