If the Risk-Free Rate Is 7%, the Return on the Market

question 8

Multiple Choice

If the risk-free rate is 7%, the return on the market portfolio is 15%, and the beta is 1.5, what is the value of the stock if the current dividend (D₀) is $1.20 and it is expected to grow at a constant rate of 6% per year?

• A) $6.30
• B) $6.70
• C) $9.20
• D) $9.80
• E) $20.00

---

Definitions:

Market Pressure

The influence on a company or industry resulting from changes in market conditions, such as customer demand, competition, or regulatory environment.

Globalization

The process by which businesses or other organizations develop international influence or start operating on an international scale.

American Companies

Businesses that are incorporated in the United States of America.

Information Overload

A condition in which individuals receive too much information in a way that complicates the ability to understand an issue or make decisions.