John Is Considering Investing in Stengar Industries Ltd

question 60

Multiple Choice

John is considering investing in Stengar Industries Ltd., a Canadian common stock with a historic annual rate of return of 13.6%. The stock is 20% more risky than the portfolio of Canadian common stocks. If Government of Canada t-bills currently yield 3% and a portfolio of Canadian common stocks has a risk premium of 6.5%, what should be John's minimum acceptable rate of return if he invests in this stock?

• A) 10.8%
• B) 16.6%
• C) 10.6%
• D) 13.6%

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Definitions:

Task Force

A temporary group of people formed for the purpose of achieving a specific goal or tackling a particular problem.

Integrator

A role or tool that combines or coordinates different elements, systems, or processes into a coherent whole.

Liaison Role

A function in which an individual acts as an intermediary or connector between different departments, organizations, or groups to facilitate communication and coordination.

Decentralization

The distribution of decision-making power and authority away from a central authority to more local or individual actors within an organization or system.