Stock a Has a Required Return of 12 Percent

question 17

Multiple Choice

Stock A has a required return of 12 percent. Stock B has a required return of 15 percent. Assume a risk-free rate of 4.75 percent. Which of the following is a correct statement about the two stocks?

• A) Stock A is riskier.
• B) Stock B is riskier.
• C) The stocks have the same risk.
• D) We would need to know if the markets are efficient to answer this question.

---

Definitions:

Stock Ledger

A record that keeps track of the stock transactions of a company, including shares bought, sold, issued, and returned.

Materials Ledger

A detailed record that tracks the quantity and cost of materials on hand.

Work in Process Account

An account used to record the costs associated with incomplete products in the manufacturing process.

Cost Ledger

A subsidiary ledger that records individual costs associated with specific cost centers or cost objects.