Ben & Terry's Has an Expected Return of 13

question 35

Multiple Choice

Ben & Terry's has an expected return of 13.2 percent and a beta of 1.08.The expected return on the market is 12.4 percent.What is the risk-free rate?

• A)3.87 percent
• B)4.24 percent
• C)2.61 percent
• D)3.29 percent
• E)2.40 percent

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Definitions:

Transfer Price

The price at which goods and services are sold between divisions within the same company or between subsidiaries of a parent company.

Market Price

The current price at which an asset or service can be bought or sold in a open market.

Variable Costs

Variable costs are those expenses that change in proportion to the volume of goods or services that a business produces.

Cost Driver

A factor that influences or contributes to the expense of certain business operations or activities.