Use the Information for the Question(s)below

question 27

Multiple Choice

Use the information for the question(s) below.
Suppose that in the coming year,you expect Exxon-Mobil stock to have a volatility of 42% and a beta of 0.9,and Merck's stock to have a volatility of 24% and a beta of 1.1.The risk-free interest rate is 4% and the market's expected return is 12%.
-The cost of capital for a project with the same beta as Merck's stock is closest to:

• A)11.2%.
• B)12.8%.
• C)12.4%.
• D)11.6%.

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Definitions:

Kruskal-Wallis Test

A nonparametric statistical test that assesses whether there are significant differences between two or more groups of an independent variable on a continuous or ordinal dependent variable.

Null Hypothesis

A default position that there is no difference or effect, used in statistics as a starting point for testing.

Distribution

Describes the way values of a variable or set of variables are spread or dispersed across possible values or ranges.

H Statistic

A test statistic used in non-parametric tests that compares the ranks of observations across multiple groups to assess the equality of their distributions.